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 Some of the bankers have decided to move elsewhere or retire, while
others have lost out to people doing similar jobs at Taubman's PJT
Capital LP, the sources said.
Blackstone agreed last October to spin off its advisory operations
in the second half of this year into a new publicly traded company
that will be run by Taubman, 54. The operations of the business
being spun off include M&A, restructuring and private fund advisory.
PJT currently focuses on M&A advisory.
The likely exodus of senior M&A bankers shows that, even though
Blackstone shareholders, including its co-founder Stephen Schwarzman,
are expected to own 65 percent of the combined business, Taubman has
the biggest role in shaping it. He will be CEO of the combined firm.
Since he left a senior role at Morgan Stanley MS.N in 2012 to strike
out on his own, Taubman has advised on deals with a value of almost
$240 billion, and he ranked 12th in the global M&A advisory league
tables in 2013 and 23rd in 2014, according to Thomson Reuters data.
By contrast, Blackstone ranked 50th in 2013 and 68th last year.
Former Blackstone executives are expected to have a bigger presence
in the restructuring and fund advisory areas, with the vast majority
of the 22 Blackstone partners in those operations expected to stay,
including the heads of these businesses, the sources said.
On the M&A side, though, 12 of the 17 senior managing directors at
Blackstone, including investment banking veterans such as Mary Anne
Citrino, Anthony Steains, James Schaefer and Greg Hewett, currently
do not yet have agreements to join PJT, the sources said.
The sources requested anonymity because they were not authorized to
publicly discuss the matter.
Spokesmen for Blackstone and PJT declined to comment on behalf of
the firms and the people involved.
SOME OFFICES WILL CLOSE
Talks are ongoing and PJT expects as many as nine Blackstone senior
MDs to join its M&A business by the time of the spinoff, the sources
said. Among those who already have agreed to work at PJT are
Blackstone senior managing directors Ivan Brockman and Karl Knapp,
the sources added.
Some of the Blackstone bankers are not joining PJT because they do
not want to make the multi-year commitment to back what is, in many
ways, a new venture, the sources said. New advisory firms can take
several years to ramp up.
There are also departures related to PJT's plans to close some of
Blackstone's 15 advisory offices around the world, the sources said.
The Frankfurt office, for example, will close because PJT's clients
can be better served for now by more well staffed offices, such as
London, the sources added.
To be sure, most of the 15 Blackstone M&A bankers who are the next
tier down – at managing director level – are expected to join PJT.
Most of them are younger and keen to be part of a new venture,
according to the sources.
John Studzinski, who runs the Blackstone M&A advisory business, will
not move over. He will stay with Blackstone to work on fundraising
initiatives.
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Martin Alderson Smith, another M&A senior managing director, is also
staying with Blackstone to advise the firm on its investments.
PJT has poached several high-profile bankers from major Wall Street
rivals in recent months, including, most recently, Jessica Kearns,
head of JPMorgan Chase & Co's JPM.N technology, media and
telecommunications syndicated and leveraged finance group, according
to some of the sources.
Other high-profile hires by Taubman in recent months include
Johannes Groeller, co-head of Europe, the Middle East and Africa M&A
at Morgan Stanley, as well as Don Cornwell, a top sports banker from
Morgan Stanley, and John Trousdale, vice chairman of global mergers
and acquisitions at Credit Suisse Group AG CSGN.VX.
FREE OF CONFLICTS
In January, Blackstone said it had extended the vesting period for
shares given to employees, a move partly aimed at making it more
difficult for bankers to be poached from PJT by competitors.
PJT's revenue is a small fraction of the revenue at New York-based
Blackstone, the world's largest alternative asset manager. PJT had
pro-forma revenue of $401.1 million in 2014. Blackstone, with its
giant private equity, real estate, credit and hedge fund arms, by
contrast, had revenue of $7.5 billion.
Yet the spin off is a bet that Blackstone's advisory business is
worth more on its own. Once it is spun off, it will be able to
pursue private equity firms as clients free from conflict of
interest concerns over Blackstone's ownership. Companies may be more
inclined to hire the new firm if they aren’t worried that Blackstone
could be a buyer of their assets.
Shares in other publicly traded investment banking boutiques,
Evercore Partners Inc EVR.N, Moelis & Co MC.N, Greenhill & Co Inc
GHL.N and Lazard Ltd LAZ.N, currently trade at an average 50 percent
premium to Blackstone based on projected 2016 earnings. Blackstone's
hope is that an independent, conflict-free PJT will be valued close
to those levels, or even better.
"We continue to estimate the tax-free spin would improve the value
that the public markets were attributing to Blackstone's advisory
business," Credit Suisse analysts wrote in a note last week.
(Additional reporting by Olivia Oran in New York; Editing by Martin
Howell)
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