BLK Expands Footprint in Private Credit, Nears HPS Investment Buyout
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BlackRock BLK is on the cusp of acquiring HPS Investment Partners for a reported $12 billion. This was stated by the Financial Times citing persons familiar with the matter.
The move underscores BlackRock's commitment to strengthening its foothold in the fast-growing alternatives market, particularly private credit—a sector witnessing robust demand amid shifting banking dynamics and investor preferences.
HPS Investment, a private credit powerhouse managing $150 billion as of Sept. 30, 2024, stands out for its early entry and dominance in the space. Founded in 2007 as a unit of JPMorgan Chase JPM, the firm has capitalized on regulatory shifts post-2008 stringent regulations, which led banks to retreat from traditional lending. In 2016, HPS Investment’s founders – Scott Kapnick, Scot French and Michael Patterson – acquired it from JPM.
For BlackRock, acquiring HPS Investment means not only gaining access to a well-established player but also rapidly boosting its presence in private credit, complementing its existing $450 billion alternatives portfolio.
HPS Investment: A Natural Fit for BlackRock
The acquisition of HPS Investment aligns seamlessly with BlackRock's broader strategy of diversifying into higher-fee businesses, away from its historically dominant exchange-traded funds (ETFs). HPS Investment has a proven track record in credit markets, spanning debt investments, leveraged loans and real estate, among other verticals. Its vast network and expertise provide BLK with the tools to cater to institutional clients seeking stable returns in uncertain markets.
HPS Investment's trajectory as a potential IPO candidate valued at $10 billion earlier this year further highlights its attractiveness. BlackRock's ability to secure the deal at a premium valuation of $12 billion showcases its focus on acquiring top-tier assets in an increasingly competitive alternatives market.
The private credit market has experienced meteoric growth, fueled by demand for non-traditional financing options and a retreat by banks constrained by post-crisis regulations. With institutional investors seeking reliable income streams, private credit has emerged as a lucrative asset class, offering stability and yield.
By acquiring HPS Investment, BlackRock positions itself at the forefront of this boom, catering to client needs while enhancing its revenue mix.
Complementing BlackRock’s Expansionary Moves
The HPS Investment acquisition comes on the heels of other transformative deals by BlackRock, including the $12.5 billion acquisition of Global Infrastructure Partners and a $3.3 billion planned purchase of Preqin, a U.K.-based private markets data group. Together, these moves indicate a calculated shift toward building a comprehensive alternatives platform encompassing private credit, infrastructure and data-driven investment insights.
This strategy positions BlackRock as a formidable competitor against alternatives giants like Ares Management, Apollo Global and Blackstone. The buyout of HPS Investment will enable synergies across BLK’s expanding suite of alternative offerings, paving the way for cross-selling opportunities and tailored solutions for institutional investors.