Blackstone Inc.
Blackstone Inc. is an American alternative investment management company based in New York City. It was founded in 1985 as a mergers and acquisitions firm by Peter Peterson and Stephen Schwarzman, who had previously worked together at Lehman Brothers. Blackstone's private equity business has been one of the largest investors in leveraged buyouts in the last three decades, while its real estate business has actively acquired commercial real estate across the globe. Blackstone is also active in credit, infrastructure, hedge funds, secondaries, growth equity, and insurance solutions. As of September 30, 2025, Blackstone has $1.2 trillion in total assets under management, making it the world's largest alternative investment firm.
History
Founding and early history
Blackstone was founded in 1985 by Peter G. Peterson and Stephen A. Schwarzman with in seed capital. The founders derived their firm's name from their names: "Schwarz" is German for "black"; "Peter", "petros", or "petra" means "stone" or "rock" in Greek. The two founders had previously worked together at Lehman Brothers. There, Schwarzman served as head of global mergers and acquisitions business. Prominent investment banker Roger C. Altman, another Lehman veteran, left his position as a managing director of Lehman Brothers to join Peterson and Schwarzman at Blackstone in 1987, but left in 1992 to join the Clinton administration as Deputy Treasury Secretary and later founded advisory investment bank Evercore Partners in 1995.Blackstone was originally formed as a mergers and acquisitions advisory boutique. It advised on the 1987 merger of investment banks E. F. Hutton & Co. and Shearson Lehman Brothers, collecting a $3.5 million fee.
File:PeterGeorgePeterson.jpg|thumb|upright|Blackstone co-founder Peter Peterson was the former chairman and CEO of Lehman Brothers.
From the outset in 1985, Schwarzman and Peterson planned to enter the private equity business but had difficulty in raising their first fund because neither had ever led a leveraged buyout. Blackstone finalized fundraising for its first private equity fund in the aftermath of Black Monday, the October 1987 global stock market crash. After two years of providing strictly advisory services, Blackstone decided to pursue a merchant banking model after its founders determined that many situations required an investment partner rather than just an advisor. The largest investors in the first fund included Prudential Insurance Company, Nikko Securities and the General Motors pension fund.
Blackstone also ventured into other businesses, most notably investment management. In 1987 Blackstone entered into a 50–50 partnership with the founders of BlackRock, Larry Fink, and Ralph Schlosstein. The two founders, who had previously run the mortgage-backed securities divisions at First Boston and Lehman Brothers, respectively, initially joined Blackstone to manage an investment fund and provide advice to financial institutions. They also planned to use a Blackstone fund to invest in financial institutions and help build an asset management business specializing in fixed income investments.
As the business grew, Japanese bank Nikko Securities acquired a 20% interest in Blackstone for a $100 million investment in 1988. Nikko's investment allowed for a major expansion of the firm and its investment activities. The growth firm also recruited politician and investment banker David Stockman from Salomon Brothers in 1988. Stockman led many key deals in his time at the firm but had a mixed record with his investments. He left Blackstone in 1999 to start his own private equity firm, Heartland Industrial Partners, based in Greenwich, Connecticut.
The firm advised CBS Corporation on its 1988 sale of CBS Records to Sony to form what would become Sony Music Entertainment. In June 1989, Blackstone acquired freight railroad operator CNW Corporation. The same year, Blackstone partnered with Salomon Brothers to raise $600 million to acquire distressed thrifts in the midst of the savings and loan crisis.
1990s
In 1990, Blackstone launched its hedge funds business, initially intended to manage investments for Blackstone senior management. The same year, Blackstone formed a partnership with J. O. Hambro Magan in the UK and Indosuez in France. Blackstone and Silverman also acquired a 65% interest in Prime Motor Inn's Ramada and Howard Johnson franchises for $140 million, creating Hospitality Franchise Systems as a holding company.In 1991, Blackstone created its Europe unit and launched its real estate investment business with the acquisition of a series of hotel businesses under Henry Silverman's leadership. In October 1991, Blackstone and Silverman added Days Inns of America for $250 million. In 1993, Hospitality Franchise Systems acquired Super 8 Motels for $125 million. Silverman left Blackstone to serve as CEO of HFS, which later became Cendant Corporation.
Blackstone made a number of notable investments in the early and mid-1990s, including Great Lakes Dredge and Dock Company, Six Flags, US Radio, Centerplate, MEGA Brands. Also, in 1996, Blackstone partnered with the Loewen Group, the second-largest funeral home and cemetery operator in North America, to acquire funeral home and cemetery businesses. The partnership's first acquisition was a $295 million buyout of Prime Succession from GTCR.
In 1995, Blackstone sold its stake in BlackRock to PNC Financial Services for $240 million. Between 1995 and 2014, PNC reported $12 billion in pretax revenues and capital gains from BlackRock. Schwarzman later described the selling of BlackRock as his worst business decision ever.
In 1997, Blackstone completed fundraising for its third private equity fund, with approximately $4 billion of investor commitments and a $1.1-billion real estate investment fund. Also in 1997, Blackstone made its first investment in Allied Waste. In 1998, Blackstone sold a 7% interest in its management company to AIG, valuing Blackstone at $2.1 billion. In 1999, Blackstone partnered with Apollo Management to provide capital for Allied Waste's acquisition of Browning-Ferris Industries. Blackstone's investment in Allied was one of its largest at that point in the firm's history.
In 1999, Blackstone launched its mezzanine capital business. It brought in five professionals, led by Howard Gellis from Nomura Holding America's Leveraged Capital Group, to manage the business.
Blackstone's investments in the late 1990s included AMF Group, Haynes International, American Axle, Premcor, CommNet Cellular, Graham Packaging, Centennial Communications, Bresnan Communications, and PAETEC Holding Corp.. Haynes and Republic Technologies International both had problems and ultimately filed bankruptcy.
Blackstone's investments in telecommunications businesses—four cable TV systems in rural areas and a cell phone operator in the Rocky Mountain states were among the most successful of the era, generating $1.5 billion of profits for Blackstone's funds.
Blackstone Real Estate Advisers, its real estate affiliate, bought the Watergate complex in Washington, D.C. in July 1998 for $39 million and sold it to Monument Realty in August 2004.
Early 2000s
In October 2000, Blackstone acquired the mortgage for 7 World Trade Center from the Teachers Insurance and Annuity Association.In July 2002, Blackstone completed fundraising for a $6.45 billion private equity fund, Blackstone Capital Partners IV, the largest private equity fund at that time.
With a significant amount of capital in its new fund, Blackstone was one of a handful of private equity investors capable of completing large transactions in the adverse conditions of the early 2000s recession. At the end of 2002, Blackstone, Thomas H. Lee Partners, and Bain Capital acquired Houghton Mifflin Company for $1.28 billion. The transaction represented one of the first large club deals completed since the collapse of the dot-com bubble.
In 2002, Hamilton E. James joined Blackstone, where he serves as president and chief operating officer. He also serves on the firm's executive and management committees, and its board of directors. In late 2002, Blackstone acquired TRW Automotive in a $4.7 billion buyout, the largest private equity deal announced that year. TRW's parent was acquired by Northrop Grumman, while Blackstone purchased its automotive parts business, a major supplier of automotive systems. Blackstone also purchased a majority interest in Columbia House, a music-buying club, in mid-2002.
Blackstone made a significant investment in Financial Guaranty Insurance Company, a monoline bond insurer alongside PMI Group, The Cypress Group and CIVC Partners. FGIC incurred heavy losses, along with other bond insurers in the 2008 credit crisis.
In 2005, Blackstone was one of seven private equity firms involved in the buyout of SunGard, a transaction valued at $11.3 billion. Blackstone's partners in the acquisition were Silver Lake, Bain Capital, Goldman Sachs Alternatives, KKR, Providence Equity Partners, and TPG. This represented the largest leveraged buyout completed since the takeover of RJR Nabisco at the end of the 1980s leveraged buyout boom. Also, at the time of its announcement, SunGard was the largest buyout of a technology company in history, a distinction it ceded to the buyout of Freescale Semiconductor. The SunGard transaction is also notable for the number of firms involved, the largest club deal completed to that point. The involvement of seven firms in the consortium was criticized by investors in private equity who considered crossholdings among firms to be generally unattractive.
In 2006, Blackstone launched its long/short equity hedge fund business, Kailix Advisors. According to Blackstone, as of September 30, 2008, Kailix Advisors had $1.9 billion of assets under management. In December 2008, Blackstone announced that Kailix would be spun off to its management team to form a new fund as an independent entity backed by Blackstone.
While Blackstone was active on the corporate investment side, it was also busy pursuing real estate investments. Blackstone acquired Prime Hospitality and Extended Stay America in 2004. Blackstone followed these investments with the acquisition of La Quinta Inns & Suites in 2005. Blackstone's largest transaction, the $26-billion buyout of Hilton Hotels Corporation, occurred in 2007 under the tenure of Hilton CFO Stephen Bollenbach. Extended Stay Hotels was sold to The Lightstone Group in July 2007 and Prime Hospitality's Wellesley Inns were folded into La Quinta. La Quinta Inns & Suites was spun out for IPO in 2014 and later acquired by Wyndham Hotels & Resorts.