John Studzinski, the global head of the corporate and mergers and acquisitions advisory practice at the Blackstone Group, has been awfully busy of late. In the midst of the global financial crisis, the veteran deal maker has been talking to companies around the world interested in buying a piece of American International Group. One of the world’s biggest insurers must raise $85 billion over the next two years to pay off U.S. government loans that it accepted on September 16 to avoid bankruptcy.
Reflecting the changing of the guard of what’s left of the traditional Wall Street, Blackstone is working with J.P. Morgan Securities as co–lead manager of AIG’s restructuring. Studzinski’s counterpart at J.P. Morgan is Alex Lynch, chairman of North America mergers and acquisitions. They are aiming to whittle the entity down to a stable group of core businesses, such as commercial insurance. Studzinski, who has been advising its board since September 13, says there are plenty of potential buyers for the company’s blue-chip assets, which run the gamut from real estate to railways and personal insurance.
Many possible buyers of these choice businesses come from outside the U.S. and Europe, reflecting, Studzinski believes, a historic redistribution of global economic power. “There have been big shifts in wealth creation over the past five to ten years. Anglo-American wealth and power are moving to Asia, the Middle East and Russia. Buyers from those regions will see these assets as crown jewels,” he says. “Wealth is being reconfigured across the planet.”
The same can be said for the hierarchy of the financial services business. A private equity shop with a thriving hedge fund business, Blackstone is one of the preeminent advisory boutiques — a group that some think will benefit from the crumbling of the traditional investment banking model in the U.S. One of a handful of financial conglomerates that have emerged as relative winners in the credit crisis, JPMorgan Chase & Co. is benefiting from its strong balance sheet and financing capability. It ranks as No. 1 in U.S. investment banking through the third quarter of 2008 in terms of revenue, according to research firm Dealogic. Blackstone is No. 29.
“My job is to focus us as the leading international advisory practice,” says Studzinski, whose group includes about 100 bankers — all senior advisers, or “grown-ups,” as he likes to say. “We are not about league tables. We aspire to be small and focused. It’s about revenue per partner, and each partner has his own business model.”
Studzinski, 52, a former head of European investment banking at Morgan Stanley and former co-head of investment banking at HSBC Holdings, has been at Blackstone since 2006. He spends his time working on strategy and doing major deals. “I manage senior client CEO relationships and focus on major transactions,” he says. Recent assignments have included advising Reuters on its $17.2 billion merger with Thomson Corp. and China Development Bank on its $3 billion investment in Barclays.
Firms such as Blackstone stand to benefit from the current shakeout, scooping up talented bankers amid the consolidation. And clients may prefer to hire a small advisory specialist that isn’t distracted by its own financial issues.
“Our business model is working,” says Studzinski, who has had his hands full dealing with troubled financial institutions. In February, he advised Bryan Sanderson, executive chairman of British mortgage lender Northern Rock, that nationalization was the most likely outcome — as it proved to be. “John’s proposition is to look at restructuring and divide the good assets from the bad assets,” says Sanderson, 68, who had also worked with Studzinski when Sanderson was chairman of British Petroleum. “He has a reputation for insight and energy. He’s focused on the major issues, and he never loses sight of the bigger picture.”
Studzinski is careful not to underestimate today’s challenges. “It’s the worst possible market to sell assets,” he says. That may be particularly true for AIG, because potential buyers are likely to view it as a forced seller.
“The smartest people say you can make money in any market, and you can,” Studzinski says. “But it’s not going to be the same money they made last year.”
