King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone [Hardcover]

David Carey (Author), John E. Morris (Author)

Book Description

Release date: October 5, 2010

Strippers and Flippers . . . or a New Positive Force Helping to Drive the Economy . . .
 
The untold story of Steve Schwarzman and Blackstone, the financier and his financial powerhouse that avoided the self-destructive tendencies of Wall Street. David Carey and John Morris show how Blackstone (and other private equity firms) transformed themselves from gamblers, hostile-takeover artists, and ‘barbarians at the gate’ into disciplined, risk-conscious investors.
The financial establishment—banks and investment bankers such as Citigroup, Bear Stearns, Lehman, UBS, Goldman Sachs, Merrill Lynch, Morgan Stanley—were the cowboys, recklessly assuming risks, leveraging up to astronomical levels and driving the economy to the brink of disaster.
Blackstone is now ready to break out once again since it is sitting on billions of dollars
that can be invested at a time when the market is starved for capital.
 
The story of a financial revolution—the greatest untold success story on Wall Street: Not only have Blackstone and a small coterie of competitors wrested control of corporations around the globe, but they have emerged as a major force on Wall Street, challenging the likes of Goldman Sachs and Morgan Stanley for dominance.
 
Great human interest story: How Blackstone went from two guys and a secretary to being one of Wall Street’s most powerful institutions, far outgrowing its much older rival KKR; and how Steve Schwarzman, with a pay packet one year of $398 million and $684 million from the Blackstone IPO, came to epitomize the spectacular new financial fortunes amassed in the 2000s.
 
Controversial: Analyzes the controversies surrounding Blackstone and whether it and other private equity firms suck the lifeblood out of companies to enrich themselves—or whether they are a force that helps make the companies they own stronger and thereby better competitors.
 
The story by two insiders with access: Insightful and hard-hitting, filled with never-before-revealed details about the workings of a heretofore secretive company that was the personal fiefdom of Schwarzman and Peter Peterson.
 
Forward-looking: How Blackstone and private equity will drive the economy and provide a model for how financing will work.

Editorial Reviews

Review

“The authors … [take] us from the early days of the Blackstone Group, when the firm was just two guys and a secretary, to the buyout boom, when Mr. Schwarzman’s conspicuous consumption became a symbol of the new Gilded Age. In between, the book dives deeply into the firm’s signature deals — Celanese! Nalco! Distressed cable bonds! — that made Mr. Schwarzman and his partners so rich. It also delivers some fun details about many of the now-famous Wall Street players that did tours of duty at the firm. —New York Times DealBook

“Carey and Morris’ thorough reporting offers a compelling look into the little understood Wall Street giant and the secrets of its success.”
—Worth Magazine

“[R]anks as one of the most even-handed treatments of the industry. David Carey and John Morris . . . received unusual access to Blackstone. . . . This allowed them to chronicle the firm in full and entertaining fashion across its 25-year history.”
—Bloomberg Brief – Mergers

“[A] broad history of private equity, with Blackstone as the touchstone.”
—Fortune.com
 
“Check out "King of Capital" because it's got gossip, it's got brains, and it's as readable as hell. And it's got some really good Schwarzman stories too.”
—The Deal

"King of Capital aspires to be a serious portrait of Blackstone and the way that Schwarzman so brilliantly built it up, scoring numerous coups along the way and avoiding the mistakes of many competitors. And it does a fine job in what it sets out to do." — Financial Times

“The authors link Blackstone’s history to the larger story of private equity’s expansion and its relationship to corporate America. They offer a lucid explanation of how the debt markets evolved from junk bonds to securitised loans, changing the types of deals that private-equity firms were able to finance.” — The Economist

About the Author

DAVID CAREY is senior writer for The Deal, a news service and magazine covering private equity and mergers and acquisitions. Before joining The Deal he was the editor of Corporate Finance magazine and wrote for Adweek, Fortune, Institutional Investor, and Financial World.
 
JOHN E. MORRIS, now an editor with Dow Jones Investment Banker, was for many years an assistant managing editor at The Deal in New York and London and before that was an editor and writer at The American Lawyer magazine.

To find out more visit: www.king-of-capital.com

See all Editorial Reviews

Product Details

• Hardcover: 400 pages
• Publisher: Crown Business; First Edition edition (October 5, 2010)
• Language: English
• ISBN-10: 0307452999
• ISBN-13: 978-0307452993
• Product Dimensions: 6.3 x 1.5 x 9.2 inches
• Shipping Weight: 1.6 pounds
• Average Customer Review: 4.5 out of 5 stars  See all reviews (19 customer reviews)
• Amazon Best Sellers Rank: #74,620 in Books (See Top 100 in Books)
  • #59 in Books > Business & Investing > Economics > Free Enterprise

More About the Author

Discover books, learn about writers, read author blogs, and more.

Most Helpful Customer Reviews

44 of 46 people found the following review helpful

5.0 out of 5 stars Carey's book is the Definitive Primer on Private Equity - It is Spellbinding November 22, 2010

By A Customer TOP 1000 REVIEWERVINE™ VOICE

Format:Hardcover

The story begins with the history of private equity. Stephen Schwarzman the ultimate central character in this book is a young mergers and acquisitions partner at Lehman Brothers. Henry Kravis of Kohlberg, Kravis and Roberts (KKR) is doing one of the first private equity buyouts called Houdaille Industries. It's a $380 million dollar deal. Schwarzman is sitting in his office at Lehman Brothers, and saying how could this be? How could KKR get this done? What are the details? It was a eureka type moment.

Schwarzman orders up the financing document, and can't believe what he is reading. He is looking at a revolutionary financial concept that he never dreamed could exist. He knows that all great achievements start out as merely a thought, and then someone must act on the thought. KKR has already been in the business the better part of a decade when Schwarzman latches onto the concept.

He tries to get Lehman Brothers to buy into the concept. They won't go, even though he explains that with one deal we could make more money than we make in a year doing everything else we do. Ultimately there is a falling out between glamour boy Pete Peterson who is running the firm with Lou Glucksman, the in your face trader who can't stand Peterson. Glucksman wins; Peterson leaves the firm and with Schwarzman and a secretary proceed over time to build Blackstone from nothing, just an idea. Together Schwarzman the young man, and Peterson the old tiger, they build Blackstone into a private equity powerhouse.

It's all here, blemishes and all. You are reading financial history as firms collapse and private equity ascends.... Blackstone proceeds to do deal after deal, year after year, making billions for 60 plus partners, Schwarzman would have paydays as big as $400 million in one year, most of it taxed at capital gains rates of 15% because of what is called "the carry".

By 2007, one out of every five mergers would be worldwide would be done by private equity groups. Blackstone with 1000 employees would dominate the industry with just a handful of other players called Carlyle, Apollo, and TPG. They would build the private equity industry into a giant that would take on traditional investment banking firms.

Schwarzman in January of 2007 gives himself a multi-million dollar birthday party by renting the Park Avenue Armory, and paying Rod Stewart a million dollars for a couple of hours of singing. By the way, you really need to know this. I have been in Wall Street for 40 years, whenever you have outlandish things happening like this birthday party, It is ALWAYS a sign of a market top developing, and there is going to be a price to be paid.

Within months of the party, Blackstone goes public with a valuation built up over 20 years equal to one third of Goldman Sachs valuation built up over more than a century. Blackstone has a 1000 employees and Goldman 30,000 plus. Blackstone has 2.3 billion in profits in 2006, and Schwarzman's personal net worth approaches $10 billion. Pete Peterson who is worth a couple of billion is there for the ride as well. Peterson made an absolutely brilliant comment at a luncheon I attended a number of months ago. He said the difference between him and other investment bankers he has known is that "He knows the meaning of the word enough." Think about it, it is profound.

The book tells the whole story from the ground up. It takes you through the public offering, and the ups and downs of the whole industry. You will see how other firms operate as well. After reading this book, there will be no surprises for you as a reader regarding the private equity industry. There is one last vital point that needs to be made and the book talks about it.

In the next few years, the entire industry must refinance the debts of many of the corporations and businesses they have bought through the years. If the money is not there to be borrowed, than it is possible that private equity by itself could be the driver of another financial crisis. I personally believe not.

Whenever these types of crisis hit, they come out of nowhere, and there are only one or two people who predict them, and they had luck on their side. You are dealing with an outlier event or what some people now call a black swan event. I promise you will love this book, and thank you for reading this review.

Richard C. Stoyeck Read more ›

56 of 62 people found the following review helpful

5.0 out of 5 stars A Captivating Read - I Finished It In a Day October 6, 2010

By E. Agarwal

Format:Hardcover

My favorite Stephen Schwarzman story is a personal one. I used to work at Lehman Brothers as an investment banker. We were (of course) bookrunners on the Blackstone IPO, and as was typical for every other IPO, the management of the company comes and teaches our traders about the value of the company. They, in turn, go and pitch the stock to their clients.

Usually it's the CEO and CFO of a company generating about $20mm of net income, an $86mm IPO, and we would struggle to fill the room. In this case, it was Stephen Schwarzman. The man was already a billionaire several times over, and the room was standing room only. Dick Fuld himself came down from the perch of the 33rd floor, and told a room full of his own employees and Stephen Schwarzman, "If we do this IPO right, Steve will be worth more than this whole company."

Boy, he had no idea how right he was.

When I heard this book was coming out, the finance nerd in me eagerly awaited and found it which local store would get it the fastest because I didn't want to wait for the online shipping time.

So, I bought it yesterday and read it in a day. It's awesome. Steve is a genius in so many ways, and the book does a good job of balancing personal/lighter stories along with the heavier finance stuff. You learn about Pete Peterson (author of the scary Running on Empty), and how together, they formed what's still the worlds largest PE firm.

I'm being purposly vague because I want people to read and experience this book for themselves.

Get it, read it. You won't be disappointed.

27 of 33 people found the following review helpful

4.0 out of 5 stars If you like this kind of thing November 3, 2010

By Narada VINE™ VOICE

Format:Hardcover|Amazon Verified Purchase

This might be the kind of thing you will like. The writers clearly had access to Steve S, and are being much more positive about him than any other source I have seen (I should say that while I do not know Schwartzman, I know many of the senior people of the pre-2004 Blackstone. While all of them did very well out of the business, none of them were fond of their fearless leader). The authors are also very positive about private equity in general, which makes the book read more like a puff piece than I would have liked. The actual contents are mostly a laundry list of deals, and some of the narrative is fairly insightful, while some just puts one to sleep (they did this, it did not work, they did this, it did work, etc, etc, etc).

To summarize: if you are very interested in the private equity business, by all means, read this book, otherwise I am not sure it will keep your attention.

4 of 4 people found the following review helpful

5.0 out of 5 stars King of Capital - Carey and Morris (Crown Business) January 12, 2011

By BlogOnBooks

Format:Hardcover

The story of Blackstone is the story of the private equity business as a whole, at least in the telling of it from business writers David Carey and John Morris. Private equity, for those who might not be familiar, is a process whereby investment groups search for corporations that are somehow in trouble or, at a minimum, in need of greater efficiencies, invest in them thus taking them `private,' only to reorganize them into entities that can be put back on the market (or sold to another firm) at a considerable profit. Sometimes it works, sometimes it doesn't.

What makes Blackstone's story unique has as much to do with the personality of its chairman as it does with the rise of the firm itself. The authors portray CEO Steve Schwarzman, much as he is seen in the press; excessively driven, periodically hot headed and one who is known for his more-than-occasional outsized behavior (from having jet-skiing waiters serve him a beachfront lunch off of his yacht in St. Barth's to a lavish, pre-IPO birthday party that may have made his spotlight a little too hot with D.C. regulators.)

The rise of the firm is well documented, from its humble beginnings (where Schwarzman and his mentor Peter Peterson, both ex-Lehman execs, set up shop with just a secretary, two desks and a billion dollar dream) to its rise through the lists of competitive firms (Drexel, Wasserstein Perrella, Forstmann Little) arriving near the top and within spitting range of the leader of the pack, Kohlberg, Kravis and Roberts (KKR.)

Along the way, Carey and Morris outline every major deal the firm was engaged in (and some they were not - thanks to former Reagan cabinet member, staffer David Stockman) as well as the personnel in and outs that sometimes narrowed the staff down to near-desparate levels.... The reader is given a conference room view of deal points, market factors and the all important banker relationships that are key to success or failure in the field, as well as a good look at Schwarzman's philosophy of always protecting the downside (Schwarzman is notorious for hating to lose money.) Part of the myth-busting applied by the authors surrounds the (ill-concieved, as they argue) notion that despite their `barbarians at the gate' style, strip and flip image, private equity firms, especially in the new world order (i.e. lower leverage opportunities post-regulation) can actually be beneficial to a firm's survival prospects (despite the standard downsizing) thus increasing the odds of a successful sale or IPO on the backside of the deal.

While "King of Capital" ostensibly purports to be the story of one firm - Blackstone - by the end, it becomes clear it really is about the two decade history of the private equity business in general, along with the argument that private equity often times helps a company rather than destroying it. If its focus had been another private equity firm (say KKR), the crux of the book would probably be very much the same. The rise of Blackstone, for all intents and purposes, parallels the path of private equity in general. That, as much as the machinations of the firm itself, is really the basis of this book. Read more ›