Buccaneering

Blackstone owes much of its rapid growth both to its founders feel for the markets and to luck,the authors argue. Blackstone closed its first fund and locked in investor commitments on October 15th 1987 just days before Black Monday. Two decades later,Blackstone rushed to become the first private-equity firm to go public in June 2007,shortly before markets turned jittery. Investors,whose shares are down nearly 60 from when Blackstone debuted,didnt benefit as much from the firms mastery of market timing.

The ascent was not entirely smooth. Many deals flopped,sometimes endangering the firm. It struggled to retain partners who clashed with Mr Schwarzmans competitive personality. It sold BlackRock,its investment-management business run by Larry Fink,for 240m in 1994 much too early. BlackRock has grown to oversee 3.2 trillion in assets. Mr Schwarzman can be a rough operator,unnerving investors and the public. After Blackstones plan to buy a residential lender collapsed in 2008,Mr Schwarzman compared the disaster to being a noodle salesman in Nagasaki when the atomic bomb went off.

The authors link Blackstones history to the larger story of private equitys 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. But the book only really takes off about two-thirds of the way through when the authors turn finally to the story of Equity Office Properties EOP,the large office-building company that Blackstone bought for nearly 39 billion. Set on breaking up EOP,it frantically sought buyers for many of the properties before going ahead with the deal,thus insulating Blackstone when the property market plunged shortly after.

For all its analysis,however,the book does not shed much light on the king of capital himself. Schwarzman had something to prove,it was clear for all to see,the authors write. What that was,however,they fail to say. Other executives,including Mr Peterson,emerge as sketches,and the dynamics driving the firm are barely touched on. Readers expecting a book as colourful as Mr Schwarzman himself may be disappointed.

The books most insightful point is that private-equity firms may fill the role that banks used to occupy,since many were weakened during the financial crisis. Blackstone has pioneered the model of buy-out firms diversifying into other business lines. Now many private-equity firms boast credit,debt restructuring,Mamp;A and property arms,which may help them gain traction in this new financial landscape.

But the next few years will test private-equitys resilience. Much of the debt at companies that buy-out firms purchased at the markets peak will fall due between 2012 and 2014. The authors believe that predictions of catastrophe are overstated. Even if they are proved right,they should already be planning an update.

The Economist Newspaper Limited 2010