Why a Blackstone IPO Makes Sense

The clarion call of a "market top" was splashed across the pages and screens of the media landscape when it was disclosed that The Blackstone Group was mulling the possibility of an IPO ("Investing Basics: IPOs").

However, I believe that Blackstone is yet another chapter in the ongoing story of successful capitalism. It is simply too easy and naïve to categorize a Blackstone IPO as a market top or as a vehicle to sucker the unsophisticated investor into the private equity arena. Rather, there is something else going on here.

As I researched my facts and developed my arguments, it became clear that there are some important lessons to be learned in the Blackstone IPO. I will address whether the IPO marks a top of the market, as well as outline the reasons why aging entrepreneurs take their companies public -- and how you can spot those opportunities and actually use them to your advantage in your trading.

Death and Taxes

Benjamin Franklin put it best in a letter to Jean-Baptiste Leroy in 1789, which was re-printed in The Works of Benjamin Franklin in 1817:

"In this world nothing can be said to be certain, except death and taxes."

Let's look at what has gone on over the past several years as three dealmakers (Warren Buffett, Estée Lauder, and Sam Zell) faced the certainties of death and taxes, and how they handled their sizeable businesses.

Warren Buffett

In Warren Buffett's recent letter to Berkshire Hathaway (BRKA) (BRKB) investors, he summarized 2006 results, and looking to the future he, in a very public way, prepared for his eventual demise. At 76 when he wrote the letter, Buffett believes that his expected lifespan is 12 more years. This may be the only point of exaggeration in Buffett's letter as the actuaries at the U.S. Department of Health and Human Services think differently. Perhaps Buffett took an online life expectancy quiz. Who knows?

Life expectancy aside, Buffett has recognized his mortality. With that fact in mind, he has taken, or is in the process of taking three important steps in estate and corporate succession planning: