Investment Approach

We have a rigorous investment approach, extensive due diligence focus, global reach, substantial transaction and financing expertise and focus on operational improvement and oversight. The following are some of the core investment principles of our corporate private equity funds.

Multi-Strategy Expertise
Blackstone takes a flexible, opportunistic investment approach that is not anchored to any single geography, industry, transaction structure, or size. Rather, we opportunistically and selectively direct capital to the most attractive investment prospects, united by a common focus on situations where our investment can facilitate a value-creating strategic transformation at a business. We have developed over time a multi-dimensional approach with respect to transaction structures, which include large public-to-privates, large private transactions, small & medium size buyouts, distressed investments/rescue financings, platform buildups and industry consolidations, minority stakes, structured equity, growth equity and startups. This versatility has and we believe will continue to allow us to maintain a robust level of investment activity and capital deployment globally over the life of the fund and across a variety of investment environments. We seek to direct our capital towards situations where in connection with our investment we can both influence and support our companies to drive change that maximizes their strategic and operational potential.

Corporate Partnerships
Corporate partnership transactions, transactions in which we invest capital alongside a major corporation, represent a signature form of private equity investing for us. As of March 31, 2009, we had invested over $8.0 billion of equity capital, or approximately 25% of total corporate private equity capital invested or committed by Blackstone since 1987, in 48 corporate partnerships. These have included transactions with AT&T Inc., General Electric Company, Northrop Grumman Corporation, Sony Corporation, Time Warner Inc., Union Carbide Corporation, Union Pacific Corporation, USX Corporation and Vivendi SA. We believe that teaming up with corporate partners enables us to benefit from access to their knowledge base and anticipated synergies and to compete more effectively against other bidders.

Sector Expertise
Our corporate private equity investment professionals have expertise in all major industries. In addition, we have access to the sector expertise of a broad array of former senior corporate executives with whom we have established informal and formal proprietary advisory relationships and who work closely with our private equity professionals, helping us to source and analyze potential investment opportunities.

Out-of-Favor, Under-Appreciated Industries
We tend to be a contrarian private equity investor. We try to avoid being influenced by swings in conventional wisdom about the relative attractiveness of industries. Instead, we seek to identify out-of-favor, under-appreciated industries, and we have successfully invested in industries such as rural telephony, oil refining, commodity chemicals, coal and automotive parts among others when they were generally perceived to be out of favor with the markets. We also try to identify developing industry trends in order to capitalize on them before they become widely appreciated and to pursue opportunities to change the structure and profit potential of specific industry sectors through consolidation.

Global Scope
We believe that private equity investing outside the United States provides attractive opportunities, and we are therefore pursuing private equity opportunities throughout the world. In Europe, in addition to our hub office in London, we rely on senior advisors who reside in various European countries to assist our London-based private equity professionals. We plan on using a similar approach to expand our reach in the greater China region and other Asian countries with our office in Hong Kong, and Beijing, as well as in India with our office in Mumbai. We believe we are one of a limited number of private equity firms with the advantage of access to a full range of cross-regional opportunities. We also believe our global reach helps us to better assist our portfolio companies in dealing with developments across various regions of the world, sourcing add-on acquisition opportunities, entering new markets and outsourcing operations to reduce costs.

Distressed Securities Investing
We believe that we have a competitive advantage in periods of weaker economic conditions or uncertainty in the debt or equity capital markets. Through our restructuring and reorganization advisory business and our GSO credit-oriented business, we have access to investment opportunities and expertise regarding companies in financial distress that many of our competitors lack. We deployed capital across a number of distressed investments in both the early 1990s and then in the early 2000s, to capitalize on periods of severe capital market dislocation, when the debt securities for many quality companies in industries we knew well were trading at significant discounts.

Significant Number of Exclusive Opportunities
In recent years we have been able to consider and execute a number of transactions that were either presented exclusively to Blackstone or were offered to only a very limited number of private equity firms. Indeed, of the 40 deals announced through March 31, 2009 for BCP V, 85% (34) were exclusive to Blackstone or situations where Blackstone prevailed despite a higher bid. We believe this principally resulted from our strong relationships with major investment banks and other financial intermediaries, our extensive network of senior advisors, our leading position in corporate partnership transactions, our ability to avail ourselves of the resources and relationships that reside in all of our firm's different businesses and our ability to arrange the acquisition of very large capitalization companies.

Superior Financing Expertise
We believe that the broad expertise of all aspects of the capital markets—debt, equity, real estate financing, derivatives and commodities—that resides across all of our firm's businesses enables us to obtain a lower cost of capital for our portfolio companies, reduce risk and uncover hidden asset value.

Alignment of Interests
Recognizing the importance of aligning the firm’s interests with those of its investors, Blackstone’s employees own most of the equity of our public entity and the firm and its employees have invested substantial capital in Blackstone’s corporate private equity funds.

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