Are Blackstone's people worth four times Google's?

Posted Apr 5th 2007 2:17PM by Peter Cohan
Filed under: Other Issues, Google (GOOG), Blackstone Group L.P (BX)

If the market is efficient, private equity's people are worth much more than Google Inc.'s (NASDAQ: GOOG) people. And at $52 million an employee, I think private equity is selling out at the top.

Blackstone Group's IPO has affected me twice. The first time I was on my way to a CNBC studio to talk about investment opportunities in the mortgage market when the producer called to cancel my segment so David Faber could announce Blackstone Group's IPO. Then, last week, my car was turned around again when CNBC canceled my segment on whether Blackstone was overvalued -- I unknowingly violated CNBC's policy against appearing on the network twice in the same day and I had already appeared once that day.

I think that if private equity firms -- like Blackstone -- are selling, I don't want to be a buyer. The decision-makers at these firms are shrewd traders. So if they are trying to get out now, I'd guess they think things are heading down from here (I favor Apollo Management's solution to sell a 10% stake to private investors [registration required] for $1.5 billion).

Is Blackstone's valuation reasonable? On an assets per employee basis, the valuation for Blackstone is comparable to Fortress Investment Group LLC (NYSE: FIG). Blackstone manages $70 billion and at a proposed market capitalization of $40 billion, its 770 employees are valued at $51.9 million each. FIG, with $26 billion under management, or 37% of the Blackstone total, is worth $20.9 million for each of its 539 staffers -- 40% of Blackstone's level.

Yet, as a venture investor, I have a hard time accepting that the employees of the best private equity firm are worth four times those of the leading technology company. At $13.7 million, Google's 10,700 workers are worth 26% of Blackstone's total. Whose people do you think are more valuable?

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Fortress or Google.

Tags: apollo, blackstone, fig, fortress, goog, google