Book reviews

This article is from Business in Vancouver April 5-11, 2011; issue 1119

King of Capital: The remarkable rise, fall, and rise again of Steve Schwarzman and Blackstone

by David Carey and John Morris

Crown Business, 2010

This book provides an excellent introduction to the world of private equity and its many permutations for those of us who are non-finance majors. More a biography of the industry than of Stephen Schwarzman himself, King of Capital chronicles the recent history of the leveraged buyout (LBO) industry, with descriptions of financial deals and examples that help to define industry concepts and techniques. But the book is no dry tome – the authors mix in enough intrigue, drama, financial complexity and high- society hustle to make a fascinating story.

They also worked co-operatively with Schwarzman, who is largely portrayed as a responsible, level-headed and brilliant investor.

Though Blackstone began as a modest two-man firm with $400,000 in capital, it grew to be a powerhouse by the time of its $4 billion IPO in 2007. Pete Peterson, senior founding member, had been U.S. secretary of commerce and economic adviser to Richard G. Nixon, as well as CEO of Lehman Brothers. Peterson recruited Schwarzman – a Harvard MBA and partner at Lehman – to help start the new M&A boutique firm in 1985.

Following Blackstone’s IPO, rival private equity firm Kohlberg Kravis Roberts filed with the SEC and listed its shares on the Euronext exchange in 2009. A fascinating side trip showcases the hunt for capital in the firm’s early days. Although initial fundraising proved much harder than the partners had expected, eventually they managed to bring on Japan’s Nikko Securities, Prudential Securities and the General Motors pension fund as investors.

Early on, Blackstone had a decision to make – work on behalf of company management in buyouts or join the ranks of corporate raiders and hostile takeover artists?

Blackstone opted for the former strategy and grew to earn the trust of such companies as Ramada, Howard Johnson, Allied Waste, United Biscuits and publisher Houghton Mifflin Co. The other strategic focus of the firm – and Schwarzman’s mantra – was to minimize risk and avoid losing money. As a result, Blackstone proved to be more cautious than other buyout firms and was able to weather the downturn of the late 1980s, when rivals failed.

Blackstone emerged from the financial crisis on a solid footing, having diversified into hedge fund and advisory services in addition to its private equity business. As it rose from modest beginnings to become an industry giant, its founders became society figures and conspicuous consumers. The book begins with Schwarzman’s 60th birthday party, a lavish Manhattan affair that featured Rod Stewart and comedian Martin Short, and added to the infamous reputation of the LBO industry.  •

Jan Wallace is head of the David Lam Management Research Library at UBC’s Sauder School of Business.

Enchantment

by Guy Kawasaki

Portfolio/Penguin

If you have other Kawasaki titles on your bookshelf, you will want to add this one – a how-to book on “enchanting” your customer, boss, employee. Inside, you’ll find out how to use “push” and “pull” technology to enchant and how to win over naysayers.

Although Kawasaki’s book doesn’t suggest anything particularly new, he employs an entertaining and, well, enchanting way to present his ideas to improve your established business or launch a new one.

Described by professor and author Bob Sutton as the “master of influence,” Kawasaki starts to cast his spell with a delightful cover – the “Kawasaki Swallowtail,” designed by Origamido Studio (the Coverphon is a good example of enchantment at work), and sprinkles personal stories, anecdotes, quotes and other business gurus’ advice throughout the book.

These all complement that main tenet – namely, that enchantment can occur anywhere, causes voluntary changes of heart, is more than manipulation and can convert the most skeptical among us.

(For a double dose of Kawasaki, also grab a copy of Reality Check, now available in paperback.) •

Donna Kaye is an assistant trade buyer at UBC Bookstore.