Blackstone OK with Wall Street buyout units

By Joseph A. Giannone

NEW YORK (Reuters) - Investment banks Goldman Sachs Group (GS.N: Quote, Profile, Research, Stock Buzz) and Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) have come under fire in the past year for pursuing private-equity deals, but a top Blackstone Group executive said on Tuesday the giant buyout firm has no objections.

"Yes, they're in private equity, but at the same time they can be very a useful source of opportunities for us to invest with," Blackstone President Hamilton "Tony" James said at the Reuters Investment Banking Summit in New York. "It's one of those two-sided coins. There's a negative aspect and there's a positive and you look at balance of that."

Goldman and other firms have drawn fire in the past two years as their private equity arms grew bigger and pursued ever-larger deals. These investments, which generate significant gains for Wall Street banks, occasionally put them in competition with buyout firms like Blackstone.

Outcry from these firms, which generate a large portion of Wall Street's investment banking fees, prompted JPMorgan Chase & Co. (JPM.N: Quote, Profile, Research, Stock Buzz) and Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) to exit or cut back their private equity businesses about two years ago.

But Goldman expanded, raising an $8.5 billion buyout fund and its deal activity soared.

Signs of strain between Goldman Sachs Capital Partners and Blackstone surfaced earlier this year amid a three-way bid with Apax Partners for British broadcaster ITV Plc. In another deal, Goldman Sachs joined a team competing against other buyout clients in a bid for Univision Communications Inc. UVN.N.

Yet these deals have not cost Goldman much in the way of business. For the first nine months, Goldman's investment banking net revenue reached $4.3 billion, more than all of last year.

James, who runs investment banking at Blackstone, said Goldman has done a fair enough job reining in its activities.  Continued...