As large as firms such as Blackstone, KKR, Carlyle and TPG have become, they are still headed by their founders. Navigating the transition from being a business dominated by one or two personalities to being a mature institution remains a challenge for most buyout firms.

KKR had three founders and Henry Kravis and George Roberts have run it for more than 20 years. TPG, also, had two co-heads from the outset. Blackstone more than any top firm was run by one man, and 15 years into the firm’s existence Steve Schwarzman had not groomed an heir.

In one of the most interesting episodes in the firm’s history, in 2000 Schwarzman decided to look outside, wooing Jimmy Lee, the near-legendary banker of the 1990s. But Lee got cold feet at the last minute. It was only two years later that Schwarzman found his man: Hamilton “Tony” James.

Hamilton "Tony" James

King of Capital describes the lengthy dinners over which the two men sized each other up before James agreed to join the firm.

In a piece for the Wall Street Journal’s FINS.com site recently, we recount this turning point for the firm, and the lessons it offers for other buyout shops and businesses more generally.

An excerpt from the book published on Clusterstock describes Schwarzman’s unsuccessful attempt to bring Lee on board.

Steve Schwarzman

To find the full answer, you have to read our book. Really.

But there are some other profiles that make good reading:

James B. Stewart, “The Birthday Party: How Stephen Schwarzman became private equity’s designated villain,” The New Yorker, Feb. 11, 2008 (probing the man who had become a punching bag)

Landon Thomas, Jr., “The Making of a Wise Man,” New York Times, Nov. 28, 2004 (suggesting Schwarzman was angling to be named Treasury Secretary by the second President Bush)

Shorter and less probing is Nelson D. Schwartz, “Wall Street’s man of the moment: With a history-making deal and a headline-making birthday party, Steve Schwarzman has become the symbol of a new era in finance. And that’s always a risky proposition,” Fortune, Feb. 21, 2007

Meanwhile, Vanity Fair discovered Schwarzman after his birthday party and Blackstone’s IPO and began churning out stories in which he figured prominently, including: Michael Shnayerson, “Hamptons Overdrive,” August 2008. Sadly, Shnayerson’s October 2007 piece on the rivalry between Schwarzman and KKR’s Henry Kravis doesn’t seem to be available on the magazine’s site.

In her book about the financial crisis, CNBC anchor Maria Bartiromo
recounts two parties of Schwarzman’s.

Finally, for fun, there’s “Blackstone Chief Seeks $7.2 Million for Hamptons Home,” New York Times blog, Aug. 28, 2009.

King of Capital tells the history of Blackstone in the larger context of the financial and corporate worlds, along with what was going on with other buyout firms. But what if you don’t want to read 300 pages — or not right now?

Wikipedia has several entries that do a pretty good job of explaining what the business is about and where it came from:

The main Private Equity page is a good primer, with definitions and sources.

A separate entry on the history of PE and venture capital traces them back to their roots and chronicles them in some detail over many decades.

For more nitty gritty, check out this surprisingly readable (it was meant for congressmen, afterall) U.S. Government Accountability Office study from 2008 of big buyouts from the peak of the market: “Private Equity: Recent Growth in Leveraged Buyouts Exposed Risks That Warrant Continued Attention.” It includes case studies of the buyouts of Nieman Marcus and Hertz.