Monday, November 26, 2012

Private Equity: A Birthday Can Make a Statement

Private Equity: A Birthday Can Make a Statement

What do Rod Stewart, Elton John, Paul McCartney, and the Rolling Stones have in common?  Your first instinct might be to think of hit singles or platinum records.  Then there’s the fact that all four are British.  Including Mick Jagger, they’ve been honored in their home country and are addressed as “Sir.”  All of this is true, but their biggest claim to common fame is that they played at the birthday party of a heavyweight in the private equity business.

Recently, Sir Paul McCartney hit the stage to regale 700 people at the Wynn Resort in Las Vegas on the occasion of David Bonderman’s 70th birthday.  Mr. Bonderman is the founder of TPG.  Ten years ago, Mr. Bonderman hired the Rolling Stones to play for him at the Hard Rock Hotel and Casino.  In 2010, Leon Black, the founder of Apollo, organized a more intimate affair.  He held his 60th birthday party at his home in the Hamptons.  Sir Elton John entertained 200 guests.  At the height of the private equity boom, Steve Schwarzman, the founder of Blackstone, rented out the Park Avenue Armory in 2007 to entertain 1,500 of his closest friends on the occasion of his 60th birthday.  Mr. Schwarzman got Sir Rod Stewart to play. 

Always Another Deal (1999)
Who gets an invite to these affairs?  Senior executives from other private equity firms.  They are the most visible and perhaps important group of attendees.  Press stories of the parties typically mention that these executives ‘dropped their fierce competition’ for the evening.  As far as I’ve been able to tell, the giants of private equity don’t compete for deals.  Rather, as I’ve written before, they tend to form consortia to limit the amount of competition (the Department of Justice is looking into this activity).  The competition is in gathering as much capital as possible from investors and generating the largest amount of fees.  But once you’ve generated billions in wealth, maybe the only remaining competition is to put on the flashiest event.  If you’re a private equity maven, you want your rivals to see that you can hire the most famous aging rock icon to serenade your birthday guests.

Here are a few additional tips, if you are planning one of these events.  Right after the invitations go out to folks in private equity, make sure to invite the bankers and a wide range of politicians.  You want to thank the bankers for financing your deals and reward the politicians for keeping your taxes low.  To give the event the appropriate glamor, you must include a long list of people from the fashion, entertainment, and media communities.  Mr. Bonderman must have thought his 70th birthday party was getting just a bit too ostentatious, so he made sure that we know that each of the 700 guests received $1,000 to donate to the charity of their choice.

Most of the press reports I’ve read about these events suggest that the birthday boys didn’t want a lot of publicity surrounding the parties.  Typically, guests are discouraged from talking to the press.  The idea of privacy is utter nonsense.  The whole point of hiring a big name entertainer and a slew of guests is to make a public statement.  Big time private equity is about money and power, and there’s nothing like throwing yourself a birthday party to remind everyone that you’ve got both.

If you’re looking to hire a British rock star, rates start at $1 million.  However if you have to ask, you don’t sit atop a private equity empire.

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