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Blackstone sees $12bn in LP interest

The New York private equity giant is telling LPs that is has demand for as much as $12bn for its next private equity fund, currently in pre-marketing mode.

The Blackstone Group, the New York-based private equity giant, is telling investors that is has interest for as much as $12 billion (€9.3 billion) for its upcoming private equity fund, according to a limited partner source.

The firm is telling investors that existing LPs have indicated as much as $9 billion  in demand for the fund, with LPs new to Blackstone indicating between $2 billion and $3 billion in interest, according to a source.

The firm, led by president Hamilton “Tony” James and chief executive officer and co-founder Stephen Schwarzman, has not set a cap or target for the fund, but according to an LP the firm is planning to raise in excess of $10 billion.

If Blackstone reaches this goal, the fund will be (for a time), the largest private equity vehicle yet raised. Earlier this month, Goldman Sachs Capital Partners announced a final close on its fifth global buyout fund on $8.5 billion (€6.6 billion). The fund is expected to mainly invest in large LBOs led by other private equity groups in North America, Europe and Asia.

In March, Washington DC’s The Carlyle Group raised $7.85 billion (€6.1 billion) for its Carlyle Partners IV fund, which will target buyout investments in the US. Simultaneously, the firm closed $2.2 billion (€1.7 billion) for its Carlyle Europe Partners II fund, which is the successor to the €1 billion Carlyle Europe Partners fund and which will target buyout investments in Europe.

Advocates of this larger breed of mega-fund say the increased amounts of capital allows private equity firms to bid on deal flow in a realm not accessible to many other players. They say $10 billion is a comparatively small war chest in the booming global M&A market. Critics say private equity firms as currently organised are ill-equipped to handle this amount of capital, but are incented to raise as much as possible to increase management fees.

Blackstone was recently part of a failed effort to buy Spanish telecom company Wind in a proposed €12 billion ($15.5 billion) deal. The firm was recently part of the winning consortium to buy financial software company SunGard for $11.3 billion (€8.8 billion). That deal was led by Silver Lake Partners and includes Bain Capital, Blackstone, Goldman Sachs, Kohlberg Kravis Roberts, Providence Equity Partners and Texas Pacific Group.