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Blackstone exec sees potential for more outsized private equity deals

Blackstone Group LP recently signed what Chairman and CEO Stephen Schwarzman called the largest private equity investment since the financial crisis, and more large deals could be on the horizon.

President Hamilton James does not necessarily anticipate a "wave" of megadeals, but he said during a fourth-quarter 2017 earnings conference call that he would not be surprised if a few more huge transactions took place following his firm's massive deal for a majority stake in Thomson Reuters Corp.'s risk and financial business. Per terms of that deal, a consortium of investors led by Blackstone is buying a 55% share in the Thomson Reuters segment for $17 billion in cash, debt and preferred equity.

When evaluating potential investments, Blackstone is looking for situations where it can make a "significant difference" in how a company is managed, James said. In Thomson Reuters' case, Blackstone believes it can do just that. James said Thomson Reuters clearly believed the same, since it stayed in the risk and financial business for nearly half the equity.

More large deals could be on the horizon because debt remains extremely cheap, and because the industry is changing to see more co-investments and partnerships.

"[Limited partners] have become increasingly interested in side-by-side and co-investments," James said. "And they have become increasingly capable of making the decision with you, almost as a partner or a cosponsor, from the get-go. That is definitely here to stay in my opinion."

Meanwhile, strong equity markets have boosted values across the board, which is making it difficult to do opportunistic transactions in the U.S., according to Schwarzman. But he expressed confidence that Blackstone can do more deals than ever before because of its product mix. He pointed out that Blackstone has tilted itself toward Europe over the last several years, and the region now comprises nearly 40% of all Blackstone's investments on an annual basis. Looking back, that shift in strategy was "a very wise thing to have done," Schwarzman said.