How Blackstone created a $100bn British empire

Times

09-06-2025

When Blackstone seized control of the Savoy Group in April 1998 it brought to a close one of the longest-running corporate sagas of the 1990s.
The US raiders succeeded where a string of bidders, including Lord Forte, Sir Maxwell Joseph of Grand Metropolitan and Lord Matthews of Trafalgar House, had previously failed.
The £520 million acquisition of the Savoy — along with Claridge's, the Connaught and the Berkeley as well as the Lygon Arms in the Cotswolds — also marked the start of a two-and-a-half-decade spending spree t in which Blackstone has built and acquired a string of businesses in the UK, ranging from holiday parks to data centres.
In just over two decades the US firm has gone from a plucky outsider to one of Britain's top foreign investors, with more than $100 billion of UK investments that employ nearly 50,000 people. Britain is Blackstone's second biggest investment market in the world.
The wider firm is also unrecognisable from the one that bought the Savoy in 1998. Founded with only £400,000, Blackstone now has a market value of $170 billion as it has ridden the boom in so-called alternative investments.
The group manages more than $1.77 trillion of assets, up from only $8.4 billion in 1998, across multiple divisions including private equity, real estate, hedge funds and credit. Globally it owns almost 250 companies, which employ almost 700,000 people, and the group lends to a further 4,900 companies. Its UK office — which doubles as its European headquarters — employs 650 people.
On Tuesday night the great and the good of the corporate and political worlds will gather at Spencer House, a grade I listed town house in St James's, to mark the 25th anniversary of Blackstone opening its first London office in 2000.
Jon Gray, now Blackstone's president and chief operating officer, worked on the Savoy bid back in 1998. 'I was a kid who hadn't spent time in Europe — other than my honeymoon to Italy — and I was in the middle of this public takeover,' he said.
'It was very exciting. I learnt a ton and I fell in love with London and the UK in the process. My affection for the place has only grown over time.'
Lionel Assant, who now leads the firm's private equity investments in Europe, was one of the first dealmakers employed in the London office. He was on track to become a partner at Goldman Sachs when he left for Blackstone in 2003.
When he called his father to share the news, he was met with some confusion. Assant said: 'I had to repeat it a few times and he asked, 'Why would you leave Goldman? You are going to be a partner one day there'.'
Blackstone's operations at the time comprised only a handful of private equity dealmakers and a total team of about 40 people.
The Savoy Hotel deal marked a run of successes
MIKE KEMP/IN PICTURES VIA GETTY IMAGES
Assant said: 'We didn't have a debt capital markets team or a general counsel helping us on deals. We didn't have an operating team. That is one of our key selling points to management teams and our investors today.
'At that time, there were about three of us doing everything. You would get your bag, put yourself on the Eurostar or the first British Airways plane to Madrid, Frankfurt, or wherever and you would schlep around to convince management teams: we're the right party.'
The group's early deals in Britain included its purchase of Cineworld for £120 million in 2004, which it floated on the London Stock Exchange three years later at a valuation of £240 million, and the acquisition in 2006 of United Biscuits, the owner of McVitie's and Hula Hoops, from its three owners, Cinven, MidOcean Partners and PAI Partners.
The year after the Cineworld deal, Blackstone acquired Merlin, then owner of the London Dungeon. Stephen Schwarzman, co-founder and chief executive of Blackstone, now describes it as one of his favourite UK deals, although at the time he took some persuading.
With a value of only £85 million Schwarzman (and the investment committee) thought the deal was too small, but Joseph Baratta, then a senior managing director, was convinced that Nick Varney, who had led a management buyout of the business, had the skills to build a global business.
'We almost didn't do it because of the size, but I remember giving up and saying, 'OK if that makes you happy, go ahead and buy it',' Schwarzman said.
Varney and Blackstone built the business into the second-largest theme park company in the world, before floating it in 2013 (and then buying the business back in 2019).
Leisure has proved a fruitful sector for Blackstone. Bourne Leisure, the owner of Butlin's, also became an obsession for Baratta, now the firm's global head of private equity, who moved to London to help set up Blackstone's operations in Europe in 2001.
Baratta was tireless in his efforts to buy the company from its three founding families, who had built out the business from a single caravan park in Whitstable in 1964.
Assant stayed at the group's caravan parks with his family as part of a wider charm offensive by the investment firm to try to persuade the Harris, Cook and Allen families to sell the business, but they could not be convinced to give up the business.
Yet, Baratta's persistence paid off when the Covid-19 pandemic struck, and the families called Blackstone to ask if they were interested in doing a deal.
Blackstone's team were convinced that the leisure sector would see a huge uplift in demand when the economy reopened and they acquired the business, with the families retaining a minority stake.
Assant said: 'We bought exceptional assets at the right point in time with real estate backing — the business owned 100 per cent of its freeholds. We tripled the capital expenditure and what we were hoping would happen did happen: when the government reopened the gates on the economy, people were flooding back into leisure, travel and events businesses.
'You don't stumble across assets by mistake. You identify the themes, the sectors and the assets that you like and it's a story of tough love. I don't think we would have gotten the call if we hadn't been close to that asset for such a long time.'
Over the past two decades, the investment firm's property deals in the UK and Europe have ranked as some of its most ambitious, with the company expanding into rental homes, affordable housing and logistical warehouses. It is working on plans to build a £10 billion data centre in Northumberland at present. Its affordable housing business — formed in 2017 — owns 22,000 homes.
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Initially led by Kenneth Caplan, who now leads the firm's real estate investments globally, Blackstone made its ambitions in real estate clear with the £1.1 billion purchase of the Broadgate office complex in Liverpool Street in 2009.
Gray described that deal as one of Blackstone's best UK investments. 'Sentiment had turned so negative around financial services in London,' he said.
James Seppala, who now leads the firm's real estate investments in Europe, said: 'Blackstone was a well-known private equity firm at the time, but it wasn't anywhere close to as established on the real estate side in Europe as it was elsewhere. The team was probably 30 people, and you're at around 120 people now.'
For Gray the anniversary isn't just a moment to look back and say: 'Hey, look at how far we've come … it's also a moment to say, hey, we're committed and we're going to do a lot more going forward.'