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If you like Stephen Schwarzman's story, you might also like:
Lawrence Ellison,
Ray Dalio,
Henry Kravis,
Carlos Slim,
Ted Turner,
Dennis Washington
and Sanford Weill

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Stephen Schwarzman
 
Stephen Schwarzman
Profile of Stephen Schwarzman Biography of Stephen Schwarzman Interview with Stephen Schwarzman Stephen Schwarzman Photo Gallery

Stephen Schwarzman Biography

Chairman and CEO, The Blackstone Group

Stephen Schwarzman Date of birth: February 14, 1947

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  Stephen Schwarzman

Stephen Schwarzman was born in Philadelphia, and grew up in nearby Abington, Pennsylvania, where he attended public schools. From an early age he worked alongside his father in his grandfather's drapery and linen business. In high school, he ran track and was elected president of his student body. He studied social sciences at Yale University: psychology, sociology and anthropology, but not economics. As graduation approached, he was still uncertain what he wanted to do for a career. During a homecoming weekend, he met Yale alumnus Bill Donaldson, and after graduating in 1969, he joined Donaldson's investment banking firm, Donaldson, Lufkin & Jenrette. In his six months with the firm, he developed a taste for corporate finance, but became keenly aware that he needed more training before he could make a career in the field. After fulfilling his military service obligation in the Army reserves, he entered Harvard Business School, graduating in 1972.

Stephen Schwarzman Biography Photo
Schwarzman interviewed with a number of investment banking firms before deciding corporate finance was his true interest. He joined Lehman Brothers, where he developed a formidable expertise in mergers and acquisitions, and made a favorable impression on the firm's new Chairman, former Commerce Secretary Peter G. Peterson. By the time of Lehman Brothers' 1977 merger with Kuhn Loeb, Schwarzman was a rising star in the firm and at age 31, he became Managing Director of Lehman Brothers, Kuhn Loeb, Inc. In his last two years with Lehman, Schwarzman chaired the firm's Mergers and Acquisitions Committee. Peterson was pushed out of the chairmanship in 1984, and Schwarzman managed the acquisition of Lehman Brothers by American Express. Not long after the merger was completed in 1985, he left the company to embark on a new venture with his mentor, Pete Peterson.

Schwarzman and Peterson proposed to build an investment firm of their own, The Blackstone Group. With two employees and only $400,000 of their own money, they set out to compete with the industry's giants, Salomon Brothers, Goldman Sachs and Morgan Stanley. In the mid-'80s, there was widespread interest in leveraged buyouts, the buying of companies with borrowed money. Schwarzman wanted to start big and raised nearly a billion dollars for Blackstone's first private equity fund. Private equity funds invest in privately held companies, those whose shares are not traded on the public stock exchanges. In this opportune moment, Blackstone prospered, as Schwarzman applied his expertise in a merger-friendly environment.

Stephen Schwarzman Biography Photo
In 1991, in the depths of a recession in the real estate market, Schwarzman took the plunge into real estate. Again, he had chosen the perfect moment, acquiring highly lucrative properties at depressed prices. In the following years, Schwarzman and Blackstone invested in a wide variety of industries, including health care, high tech and communications. At first, most of the group's investments were concentrated in the United States, Britain and Germany. In 2004, Schwarzman picked up the German chemical company Celanese, when most investors were avoiding the chemical industry. He took Celanese public in the U.S. when interest in chemical stocks was rising, and reaped a windfall.

In addition to its private equity operations, Blackstone manages hedge funds and provides restructuring advice to corporate clients. In the 1990s, these consulting and advisory services took Blackstone's activities farther east, to Japan and India. The firm has assisted in some of the largest mergers ever transacted between Japanese and American companies. Since the late '90s, Blackstone has advised Sony on its foreign acquisitions. Under Schwarzman's leadership, Blackstone has also led bankruptcy restructurings of troubled businesses such as Enron and Global Crossing.

In 2007, in the biggest leveraged buyout in history, Blackstone acquired Equity Office Partners for $34 billion, taking possession of 540 office buildings around the United States. The deal was quickly followed with the acquisition of the Hilton Hotel chain.

Stephen Schwarzman Biography Photo
At the height of its success, Schwarzman made the unprecedented decision to take Blackstone public, a first for a private equity firm in the United States. For the preceding five years, Blackstone's real estate and private equity funds had earned more than 30 percent a year for their participants, primarily institutional investors such as public and corporate retirement funds. Taking the firm public enabled ordinary individual investors to participate in Blackstone's unparalleled earnings. In the largest initial public offering (IPO) in history, Blackstone entered the market at a value of over $40 billion. This innovative move set off a wave of IPOs by other private equity firms. At the time, Blackstone controlled nearly 50 companies, businesses ranging from orthopedic devices, Gold Toe socks and Michael's art supplies stores to Vlasic Pickles and Aunt Jemima pancake mix.

At the end of 2007, it was estimated that Blackstone had access to credit of $125 billion to acquire new companies. Stephen Schwarzman's management of Blackstone's investments had made him a billionaire several times over. His personal shares in the Blackstone Group were valued at $7.7 billion, and he was earning well over a million dollars a day.

The following year, the collapse of the U.S. housing market brought about an unprecedented contraction of credit and the collapse of many of the country's largest investment banks, including Schwarzman's old firm, Lehman Brothers. Although Blackstone had anticipated the subprime mortgage meltdown, it was not invulnerable. The firm continued to post a profit in the first half of the year, but in the third quarter of 2008, it reported losses of over $500 million. As the company marked down the value of its holdings, its own stock price fell to a fraction of its former value. In the midst of this turmoil, Blackstone's financial advisory business continued to show a profit, as troubled corporations, including insurance giant AIG, turned to Blackstone for counsel. In the years ahead, Blackstone's -- and Schwarzman's -- ability to ride out the storm may be a crucial factor in the recovery of the world economy.

Schwarzman and his wife, intellectual property attorney Christine Hearst Schwarzman, maintain their principal residence in New York City. An enthusiastic supporter of the arts and culture, Stephen Schwarzman is a longtime director of such major cultural institutions as the New York Public Library and the New York City Ballet. From 2004 to 2010, he also served as Chairman of the John F. Kennedy Center for the Performing Arts in Washington, D.C. In 2008, he donated $100 million to the New York Public Library to finance the renovation of its main branch building on 42nd Street and 5th Avenue. The 100-year-old Beaux Arts landmark has been renamed in his honor.




This page last revised on Aug 08, 2011 11:15 EST
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