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BLK's Buyout of HPS Investment: A Leap Into the Private Credit Market
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BlackRock Inc. (BLK - Free Report) has announced a definitive agreement to acquire HPS Investment Partners for $12 billion in an all-equity transaction. The move signals the company’s deeper foray into the private credit market, which is rapidly emerging as one of the most lucrative sectors in global finance.
Private credit, or non-bank lending to businesses, has grown exponentially in recent years as stricter banking regulations limit traditional lenders’ ability to finance riskier loans. Institutions like HPS Investment have stepped in, providing tailored financing solutions across sponsor and non-sponsor channels.
The global private credit market is currently valued at $1.5 trillion and is expected to reach $4.5 trillion by 2030, per BlackRock’s updated projections. This growth is fueled by strong demand from businesses of all sizes seeking flexible, scalable financing options and investors looking for high-yield, long-duration assets.
Under the agreement, BlackRock will pay $12 billion entirely in equity, issuing 12.1 million SubCo Units through a wholly-owned subsidiary. These units are exchangeable on a one-to-one basis for BlackRock common stock and carry equivalent dividend rights.
Approximately 75% of the payment will be made at closing, with the remaining 25% deferred for five years, contingent on financial performance milestones. An additional $675 million will be allocated to an equity retention pool for HPS Investment employees.
The deal is expected to close in mid-2025, pending regulatory approvals. BlackRock will also retire or refinance $400 million of existing HPS Investment debt as part of the transaction. Upon completion, the acquisition will create a combined private credit franchise managing $220 billion in client assets.
Image Source: BlackRock, Inc.
Several of BlackRock's competitors in the alternative asset management business, such as Apollo Global Management (APO - Free Report) , Blackstone (BX - Free Report) and Ares Management (ARES - Free Report) , have made more significant strides in private credit. As of Sept. 30, 2024, Apollo managed $598 billion in credit assets, while Ares oversaw $335 billion. Additionally, Blackstone managed a total of $432 billion across its extensive credit platform as of the same date.
How the HPS Investment Acquisition Benefits BlackRock
Strengthening Private Credit Capabilities: The acquisition of HPS Investment, with $148 billion in assets under management (AUM), significantly bolsters BlackRock’s private credit platform. HPS Investment’s expertise spans senior and junior credit solutions, asset-based finance, real estate, private placements and collateralized loan obligations (CLOs). By combining HPS Investment’s capabilities with BlackRock’s existing $90 billion private credit business, the firm aims to become a top-five player in private credit globally.
Enhancing Client Offerings: The combined platform will provide a holistic suite of private financing solutions, uniting direct lending, fund finance and BlackRock’s GP/LP solutions. This enables the company to serve a diverse client base, including insurers, pensions, sovereign wealth funds and individual investors, with integrated public and private market solutions.
Synergies With Public Fixed Income: BlackRock already manages a $3 trillion public fixed-income portfolio. Integrating HPS Investment’s private credit capabilities allows the company to offer comprehensive portfolio solutions, optimizing liquidity, yield and diversification for clients. This alignment reflects CEO Larry Fink’s vision of blending public and private markets into a unified investment strategy.
Growth in Fee-Based Revenue: The acquisition is projected to increase BlackRock’s private markets fee-paying AUM and management fees by 40% and 35%, respectively. Additionally, the deal is expected to be modestly accretive to BlackRock’s adjusted earnings per share in the first year post-close.
In 2025, HPS Investment is expected to add approximately $850 million of the base fee and nearly $360 million of post-tax Fee-related earnings (FRE) at a 50% margin.
BlackRock’s Broader Strategy in Alternatives
The HPS Investment acquisition is BlackRock’s third major deal in 2024, following the $12.5 billion acquisition of Global Infrastructure Partners (GIP) and the $3.2 billion pending purchase of Preqin, a private markets data provider. These moves are part of a larger strategy to expand the company’s alternative investments platform, which now oversees approximately $600 billion in assets.
These acquisitions position BlackRock as a comprehensive platform for investors, seamlessly integrating public and private markets. They also highlight the firm’s commitment to staying ahead of market trends and client needs, as noted by Fink.
Our Take on the BLK-HPS Investment Deal
BlackRock’s $12 billion acquisition of HPS Investment marks a pivotal moment in the firm’s evolution as a leader in private credit.
By combining HPS Investment’s diversified credit expertise with BlackRock’s global scale and resources, the deal strengthens the latter’s ability to deliver integrated public-private investment solutions. Furthermore, it underscores the growing appeal of private credit as a dynamic and lucrative asset class.
Coupled with its recent acquisitions of GIP and Preqin, the HPS Investment transaction demonstrates BlackRock’s aggressive push into alternative investments. These moves not only enhance the company’s competitive position but also pave the way for sustainable, long-term growth in one of the most promising segments of global finance.
Shares of BLK have rallied 28% this year compared with the industry’s growth of 41.3%.
Image: Bigstock
BLK's Buyout of HPS Investment: A Leap Into the Private Credit Market
BlackRock Inc. (BLK - Free Report) has announced a definitive agreement to acquire HPS Investment Partners for $12 billion in an all-equity transaction. The move signals the company’s deeper foray into the private credit market, which is rapidly emerging as one of the most lucrative sectors in global finance.
Private credit, or non-bank lending to businesses, has grown exponentially in recent years as stricter banking regulations limit traditional lenders’ ability to finance riskier loans. Institutions like HPS Investment have stepped in, providing tailored financing solutions across sponsor and non-sponsor channels.
The global private credit market is currently valued at $1.5 trillion and is expected to reach $4.5 trillion by 2030, per BlackRock’s updated projections. This growth is fueled by strong demand from businesses of all sizes seeking flexible, scalable financing options and investors looking for high-yield, long-duration assets.
Image Source: BlackRock, Inc.
BlackRock’s HPS Investment Acquisition: Deal Overview
Under the agreement, BlackRock will pay $12 billion entirely in equity, issuing 12.1 million SubCo Units through a wholly-owned subsidiary. These units are exchangeable on a one-to-one basis for BlackRock common stock and carry equivalent dividend rights.
Approximately 75% of the payment will be made at closing, with the remaining 25% deferred for five years, contingent on financial performance milestones. An additional $675 million will be allocated to an equity retention pool for HPS Investment employees.
The deal is expected to close in mid-2025, pending regulatory approvals. BlackRock will also retire or refinance $400 million of existing HPS Investment debt as part of the transaction. Upon completion, the acquisition will create a combined private credit franchise managing $220 billion in client assets.
Image Source: BlackRock, Inc.
Several of BlackRock's competitors in the alternative asset management business, such as Apollo Global Management (APO - Free Report) , Blackstone (BX - Free Report) and Ares Management (ARES - Free Report) , have made more significant strides in private credit. As of Sept. 30, 2024, Apollo managed $598 billion in credit assets, while Ares oversaw $335 billion. Additionally, Blackstone managed a total of $432 billion across its extensive credit platform as of the same date.
How the HPS Investment Acquisition Benefits BlackRock
Strengthening Private Credit Capabilities: The acquisition of HPS Investment, with $148 billion in assets under management (AUM), significantly bolsters BlackRock’s private credit platform. HPS Investment’s expertise spans senior and junior credit solutions, asset-based finance, real estate, private placements and collateralized loan obligations (CLOs). By combining HPS Investment’s capabilities with BlackRock’s existing $90 billion private credit business, the firm aims to become a top-five player in private credit globally.
Enhancing Client Offerings: The combined platform will provide a holistic suite of private financing solutions, uniting direct lending, fund finance and BlackRock’s GP/LP solutions. This enables the company to serve a diverse client base, including insurers, pensions, sovereign wealth funds and individual investors, with integrated public and private market solutions.
Synergies With Public Fixed Income: BlackRock already manages a $3 trillion public fixed-income portfolio. Integrating HPS Investment’s private credit capabilities allows the company to offer comprehensive portfolio solutions, optimizing liquidity, yield and diversification for clients. This alignment reflects CEO Larry Fink’s vision of blending public and private markets into a unified investment strategy.
Growth in Fee-Based Revenue: The acquisition is projected to increase BlackRock’s private markets fee-paying AUM and management fees by 40% and 35%, respectively. Additionally, the deal is expected to be modestly accretive to BlackRock’s adjusted earnings per share in the first year post-close.
In 2025, HPS Investment is expected to add approximately $850 million of the base fee and nearly $360 million of post-tax Fee-related earnings (FRE) at a 50% margin.
BlackRock’s Broader Strategy in Alternatives
The HPS Investment acquisition is BlackRock’s third major deal in 2024, following the $12.5 billion acquisition of Global Infrastructure Partners (GIP) and the $3.2 billion pending purchase of Preqin, a private markets data provider. These moves are part of a larger strategy to expand the company’s alternative investments platform, which now oversees approximately $600 billion in assets.
These acquisitions position BlackRock as a comprehensive platform for investors, seamlessly integrating public and private markets. They also highlight the firm’s commitment to staying ahead of market trends and client needs, as noted by Fink.
Our Take on the BLK-HPS Investment Deal
BlackRock’s $12 billion acquisition of HPS Investment marks a pivotal moment in the firm’s evolution as a leader in private credit.
By combining HPS Investment’s diversified credit expertise with BlackRock’s global scale and resources, the deal strengthens the latter’s ability to deliver integrated public-private investment solutions. Furthermore, it underscores the growing appeal of private credit as a dynamic and lucrative asset class.
Coupled with its recent acquisitions of GIP and Preqin, the HPS Investment transaction demonstrates BlackRock’s aggressive push into alternative investments. These moves not only enhance the company’s competitive position but also pave the way for sustainable, long-term growth in one of the most promising segments of global finance.
Shares of BLK have rallied 28% this year compared with the industry’s growth of 41.3%.
Image Source: Zacks Investment Research
At present, BlackRock carries a Zacks Rank of 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.