What Do Private Equity Investors Look For? Blackstone's Playbook

Añadido: 2026-06-01

[00:00:00]If you Google seven brew coffee right now, you'll have all these articles about traffic jams that are being created. A very simple HVAC like heating and cooling business all of a sudden is incorporating AI into it through a new revenue line that it never had before.

[00:00:14]If you look at the opening match of the IPL this year, which is the league that our cricket team uh sits within, it had 400 million more viewers than the Super Bowl. Oh my gosh. If this business were to go away tomorrow, would its customers care?

[00:00:30]While Blackstone has expanded marketkedly from its beginnings of a private equity shop, it's still very much in its DNA. There are more than 270 companies in its portfolio, but they're brought together in a thoughtful way.

[00:00:44]So, how do then subs and satellites fit together in a portfolio? Ver Patel is here to explain it. So, I guess let's start with that opening question. How do subs and satellites go together?

[00:00:59]>> It's a great question. Uh because you're right at the on the surface, you know, you think about subs, you think about, you know, uh satellites, and you go, why why would you put these why would you put these things together? But the reality is, if you look at why we're investing in any one company, you can see what the connectivity is. And really, what drives these things together is this desire that we have to invest behind long-term, secular, and durable tailwinds. So when you're looking to evaluate a possible investment, what characteristics are you looking for if the business models themselves can be so different?

[00:01:32]>> Yeah. I mean, look, I think it starts again with thematically. What do we really like thematically? Do we think this is a good neighborhood for us to invest in behind? But then to your point, you do have to go a level deeper and say, what is it about this company that makes it special? One of the things that we really ask ourselves quite a bit is how important is this business? If this business were to go away tomorrow, would its customers care?

[00:01:52]>> So, you talked about thematics and there are some big themes that run throughout the portfolio. I feel like we have to start a little bit with AI in general.

[00:02:00]What is Blackstone looking for when you're looking at an investment that is tied to AI?

[00:02:06]>> So, when we think about AI, you really have to think about it as a theme that impacts everything from the actual infrastructure that enables AI to happen to the energy that powers it and then the actual AI companies themselves at the application layer. Maybe let's start at the application layer because that tends to be maybe the the most exciting side of uh side of things. So companies like OpenAI, companies like Enthropic, when we first made our investments into these companies last year, we were thinking a lot about a few things. One, this is an incredibly disruptive technology that has the potential to permeate huge huge parts of the economy.

[00:02:39]And if you think about any technological cycle that we've had over the last 20, 30 years, whether that's internet, mobile, cloud, the application side is when you've created the most amount of value. And so we like the idea of having exposure to that big uh that big long tailwind. Open AAI uh was a little bit more of a bet on consumer adoption, right? One of the fastest companies to get adoption as an app ever. And then Anthropic was a little bit more of a bet on enterprise adoption of uh of AI. And interestingly for us, some of our best relationships with these companies didn't necessarily start on the private equity side or even the growth side.

[00:03:14]Actually started on the real estate side.

[00:03:16]>> Okay. How what do you mean?

[00:03:17]>> All of these companies need compute, right? In order for for OpenAI for anthropic to deliver AI to all of us, you actually need uh compute capacity and that sits in data centers. And so given that we are such a large owner and developer of data centers, that was a relationship that we were able to lean on to really build uh connectivity with both of these companies.

[00:03:38]>> And then that brings it back to sort of a physical investment thesis. That's that's really interesting. So then there are other investments that AI maybe doesn't replicate but but could improve.

[00:03:48]What are some of those examples?

[00:03:50]>> A few different ways to kind of think about that. So yes, we own a lot of data centers, but the amount of data center growth that is happening means the services economy around that is growing very very quickly. Okay. And so companies that are providing power to data centers, electrical services, cooling, servers, storage, any of those components are growing very quickly in today's market. So for example, we own a company called air control. It's a simple HVAC business. And what's really interesting about that is, you know, HVAC is typically a GDP, GDP plus type grower. Uh, so not that exciting, but this business really had very little data center capacity before we invested in them. And so we were able to help them make introductions into the data center community, you know, whether it's our data centers or others. And today, a substantial portion of the earnings of that business are actually coming from data centers. So now you actually have this environment where you know a very simple HVAC like heating and cooling business right all of a sudden is incorporating AI into it through a new revenue line that it never had before.

[00:04:51]>> All right so let's go from the fundamentals of infrastructure to the future thinking bigger. Can you talk about SpaceX?

[00:04:59]Yeah, look, that's one of our uh that's one of the more fun ones and it was certainly a fun discussion at investment committee to kind of talk through. But again, this goes back to the idea that we want to invest behind long-term durable sector tailwinds. And one of the things that we believe is that if you look out over the next 10, 15, 20 years, commercial activity in space is going to increase at a pretty significant pace.

[00:05:20]And we think it's the type of business that other businesses are going to be built on top of it. Starlink, which sits within SpaceX, is kind of the first example of that. But over time, there's going to be a number of different businesses that people are going to think about doing that are going to use Space S rockets to get there.

[00:05:35]>> I mean, to think about investing in commercial activity in space is fairly mind-blowing and a really exciting area to talk about. We've talked about AI, we've talked about infrastructure, we've gone to space, but let's come back down to Earth. Everybody's got to eat. And we like franchiseors sort of for that very fundamental reason. So, from the future to fundamentals, let's talk about that.

[00:05:55]When you think about uh our franchiseor investments, a few things. Um we own several. I mean, go back to 2007 when we first uh bought Hilton. But today, Jersey Mike's, Seven Brew Coffee, Tropical Smoothie Cafe. We like these business models for a few reasons. If you find the right concept with enough whites space growth and you can open enough stores, they can be tremendously high growth. And importantly, a franchiseor gets a royalty on systemwide sales. So, we're not actually the ones opening the stores. There's a franchisee that goes out, they open the stores, they spend the capital, they hire the people. We get a percentage of revenues off of the top. So, we're responsible for the marketing, uh, for the brand, for the formula, for the recipe, supply chain, but we're not actually opening it. So, that means you can have high growth, you mean high margins, you can have high free cash flow. So, all of those words are really wonderful for a private equity person. We are active owners, but we're not active managers, right? We help our companies, we bring the resources to these businesses in order to help them accelerate their growth. So, that's a good example in Jersey Mike's of something that uh we're able to take a business that looks like one and really accelerate it uh going forward. 7 Brew Coffee is another example of it. A little slightly different playbook in that New Jersey Mike's much more established franchise, 3,000 stores. 7 Brew Coffee, much much earlier stage. This was actually more of a growth investment than than a private equity investment. Same business model, right? Franchise or business model, but much smaller store count. But this also played a little bit on this idea of live experiences. You can make an endless number of combinations of of drinks. My daughter would have a field day uh there, but it is a real experiential uh thing in terms of how you actually get your coffee or your your drink there. Um and that has done incredibly incredibly well. If you go Google Seven Brew coffee right now, you'll have all these articles about seven brew popping up in towns and they're just being like traffic jams. The real key to be these things is it needs a slightly different playbook than Jersey Mike does, right?

[00:07:45]slightly different playbook but same idea behind a great brand that's doing incredibly well with consumers uh plays on this live experience. The other thing we like is how we can actually help them. Um we are one of the world's largest real estate investors and uh site selection is an incredibly important part of how one thinks about where you open your new stores and for us we've really tried to apply AI to drive that. Apply AI apply data science to drive that site selection. we can sit with our data science team and then they can run their models and then map that across different locations across the United States, right? Wow. And out of that can give you a much better sense of well, you know what, if we open a store here, it has a better chance of having strong um unit sales, higher sales velocity, and so it's those sorts of things that we love to be able to do.

[00:08:34]Bring our AI and our data science capabilities to help our companies drive faster. So again, really strong fundamentals in franchiseors. love the business models, but we also love what we can do with them.

[00:08:44]>> Yeah. Yeah. You can take the insights that you have as a part of this business and then apply it across the board.

[00:08:48]That's fascinating. But then what about sports? Cricket. What in the world does that have to do with portfolio construction?

[00:08:55]>> Cricket provides a few things. One, sports investments are really lower correlated assets. We're looking for investments that will have less correlation to macroeconomic factors, less focused on GDP, less focused on inflation. As a society, we continue to spend more of our dollars on these live experiences. So sports fits a little bit of that theme from a portfolio construction perspective, but it also is part of a broader theme of investing behind India, right? It's been one of our best performing equity markets globally for us in the last five, six years.

[00:09:25]>> And then also just digging into that a little deeper with India. You've talked about how the sports landscape for broadcast is a little less developed there than here, but there's opportunity for that as well.

[00:09:35]>> Absolutely. So the media rights um in India are just at an earlier stage of their development than you see uh in the United States or even in Europe.

[00:09:43]Interesting stat if you look at the opening match of the IPL this year which is the league that our cricket team uh sits within it had 400 million more viewers than the Super Bowl did. The media rights we believe have the potential to really increase over time.

[00:09:57]That's both with broadcast rights but also on the streaming platform. So as that goes in we think there's an ability for a little bit more appreciation in those media rights. And that's an brings us back sort of to that timing point when you're constructing a portfolio. So just making sure I understand when we're looking at our 270 company portfolio here at Blackstone. There are connecting themes throughout, but there are also reasons why one investment makes sense against another. So we're investing in the future of AI in a number of ways, but we're also looking at the infrastructure that powers AI that supports it. Uh but then there's also things that maybe AI can't touch like a cricket team or seven brew coffee. And so all of that sort of fits together in some ways but also complimentary and others. Is that right?

[00:10:46]>> That's a great way to think about it. We try to think of our portfolio construction here at the firm as being um really holistic. Right. We're we're trying to diversify our exposure across a lot of different areas. We don't want to overconentrate in any one thing. So even though we believe AI is a big tailwind that we want to invest meaningful dollars behind, we want to do that in a way where we're investing in multiple different sectors that are tied to AI, not just one way of playing it.

[00:11:11]And so there's investments can play off of one another. That's really the key to the portfolio construction.

[00:11:16]>> Okay, I think I get it now. I understand how subs and satellites can work together. Veril Patel, thank you so much for explaining this with us. Thank you for having me. You got it.