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In an exclusive interview with CNBC's Maria Bartiromo, Blackstone Group CEO Steve Schwarzman and BlackRock CEO Laurence Fink said they see even bigger corporate buyouts than the recent purchases of TXU and Equity Office Properties.
"I would be surprised to not see something bigger" than the TXU deal, Fink said, referring to Kohlberg Kravis Roberts' recent agreement to buy the Texas utility for $44 billion.
Schwarzman, whose Blackstone Group recently agreed to buy Equity Office Properties for $39 billion, said that current conditions make it feasible to "do something bigger" than TXU but said he'd rather cut a much smaller deal for solid results.
"It makes better headlines to do bigger things," he said, but doesn't guarantee a "really good rate of return."
Schwarzman said that he'd cut his growth expectations for the economy a year ago and has been acquiring companies that have less vulnerability to economic swings.
Fink, whose BlackRock recently reached an agreement with Merrill Lynch that put assets under his control to $1 trillion, told Bartiromo that debt markets and bank loans are financing bigger and bigger mergers--and private equity is playing a much bigger arbitrage role.
Schwarzman praised the private equity sector not only for its profitability, but for the "enormous good" it does for the economy. He said that the sector can undertake "certain things" that publicly traded firms cannot, citing the squeamishness that public companies' "emphasis on quarterly earnings" creates.
Schwarzman lamented the timid "compliance culture" engendered by the Sarbanes-Oxley Act, saying it exacerbates the tendency of boards to shy from long-term strategies as they try to "please shareholders" in the short-term.
Fink agreed with the dangers of quarter-to-quarter planning, declaring it "not a good thing for America, New York City or our exchanges."
Both CEOs praised the state of liquidity, which Fink said is "still at record levels." He added that if heavier charges or taxes are levied on investments, especially in private equity, it won't harm bigger established companies nearly as much as it will the "small, younger" rivals.
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