BlackRock's Continued Dealmaking Strategy in 2024

By David French, Andres Gonzalez, and Davide Barbuscia

NEW YORK (Reuters) – A dealmaking splurge by BlackRock (NYSE:BLK) in 2024 may continue as the world's largest asset manager is expected to opportunistically look to expand further in private credit, real estate, infrastructure, or possibly private equity.

New York-based BlackRock announced last week plans to buy private credit firm HPS Investment Partners for about $12 billion in a deal that BlackRock CEO Larry Fink said will allow the companies to integrate private and public market investment products. It was BlackRock's third major acquisition this year.

Future Acquisitions

Looking ahead, financial sources and analysts suggest BlackRock could enhance its presence in private markets through further acquisitions. Targets might include private credit expansion or bulking up in private equity, which could position BlackRock to compete better with larger players in alternative investments.

"They look at everything," said Daniel Fannon, an analyst at Jefferies who covers BlackRock. "They are canvassing the market for appropriate partners and asset classes that they are relevant in."

Strategic Spending

BlackRock spent approximately $28 billion in 2024 to bolster its private market offerings. This strategic move is viewed by Fink as key to positioning the firm as a conduit for private capital into global infrastructure projects amid tightening government budgets and rising public debt.

Private credit has seen significant growth due to stricter regulations that have increased costs for traditional banks providing higher-risk loans. In October, BlackRock finalized its $12.5 billion acquisition of investment firm Global Infrastructure Partners and anticipates completing a $3.2 billion purchase of private markets data provider Preqin by year-end.

Competitive Landscape

The HPS deal will create a private credit franchise with about $220 billion in client assets. Meanwhile, rival Ares Management (NYSE:ARES) has approximately $313.6 billion in private credit assets, while Blackstone (NYSE:BX) reports about $432 billion in its credit business.

Still, BlackRock may continue to pursue expansion in infrastructure and private credit, potentially targeting smaller, complementary acquisitions to enrich its offerings. Analysts note that BlackRock has signaled a strong desire to grow significantly in private credit and infrastructure within private markets.

Considerations for Private Equity

Private equity could also be a potential expansion avenue. Although BlackRock has had discussions with private equity firms, none have progressed significantly. Analysts caution that private equity may not be an immediate focus due to industry challenges.

In terms of alternative assets under management, BlackRock's totaled approximately $320 billion by the end of September, a small fraction of its $11.5 trillion in total assets.

BlackRock's alternative asset acquisitions appear to reflect greater strategic importance than mere asset management and suggest that additional ventures into private markets may be on the horizon.

Balancing Growth

BlackRock's CFO, Martin Small, mentioned during their third-quarter earnings call that the firm considers both organic and inorganic investments and does not require M&A to meet organic growth targets.

However, a senior investment banker indicated BlackRock's recent acquisitions have been opportunistic, suggesting that new targets could emerge if circumstances are beneficial.

Market Digest and Future Outlook

After this year’s acquisition spree, experts believe the company might take a pause to digest its recent acquisitions before focusing on upcoming fundraising and product development. Mac Sykes, portfolio manager for BlackRock investor Gabelli Funds, stated that while HPS was not likely to be BlackRock's last acquisition, the company is under no pressure to pursue more deals.

"I see them as being opportunistic with a high bar. They are smart capital allocators," Sykes said.