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BlackRock’s Strategic Expansion into Private Credit with HPS Acquisition

  • peachgardenpartner
  • Jan 27
  • 4 min read

Updated: Feb 12

By Leuan Jennings



Overview of the Deal


  • Acquirer: BlackRock, Inc. (BLK)

  • Target: HPS Investment Partners, LLC

  • Transaction Value: $14.4bn

  • Equity Valuation: Undisclosed

  • Expected Close Date: Mid 2025

  • Target Advisors: BNP Paribas (financial), BofA Securities (financial), Deutsche Bank Securities (financial), Goldman Sachs & Co. (financial), J.P. Morgan Securities (financial), RBC Capital Markets (financial), Fried Franks (legal)

  • Acquirer Advisors: Morgan Stanley & Co. (financial), PWP (financial), Skadden (legal), Clifford Chance (legal)



Strategic Rationale

This acquisition positions BlackRock to capitalize on the booming private credit market, projected to reach $2.6 trillion by 2029, by integrating HPS’s expertise in private credit origination and capital flexibility into its platform. By leveraging its extensive corporate relationships and global scale, the transaction strengthens BlackRock’s ability to offer integrated public and private income solutions, driving growth in assets under management and enhancing its competitive positioning in a high-growth asset class.


On December 3, 2024, BlackRock, Inc. agreed to acquire HPS Investment Partners for $14.4 billion. Following the announcement, BlackRock’s share price rose 1.8% within a day and continued increasing daily until December 16.
On December 3, 2024, BlackRock, Inc. agreed to acquire HPS Investment Partners for $14.4 billion. Following the announcement, BlackRock’s share price rose 1.8% within a day and continued increasing daily until December 16.


Transaction Details


Acquirer Profile: BlackRock, Inc.

  • Industry and Core Operations: BlackRock (NYSE: BLK) is the world’s largest asset manager, overseeing $10 trillion in assets as of Q4 2022. While the company specialises in asset management, it also offers risk management, advisory services, and a range of investment vehicles. Operating in over 100 countries, BlackRock offers solutions to a diverse client base, including governments, corporations, and institutional investors.


  • Founded: 1988

  • Headquarters: New York, USA

  • Key Financials (as of 26/01/2025):

    • Market Cap: $158,046M

    • Enterprise Value (EV): $159,833M

    • LTM Revenue: $20,407M

    • LTM EBITDA: $8,117M

    • EV/Revenue Multiple: 7.8x

    • EV/EBITDA Multiple: 19.7x

  • Recent Acquisitions: Orennia Inc., Upvest GmbH, X.AI Corp.



Target Profile: HPS Investment Partners, LLC

  • Industry and Offerings: HPS Investment Partners, founded in 2007 and previously owned by JP Morgan, is a global private equity and venture capital firm specialising in private credit, real estate, and asset-based financing. It invests across industries such as energy, telecom, and software, focusing on companies with $150–500M in sales and $100–300M in EBITDA.


  • Founded: 2007

  • Headquarters: New York, USA

  • Key Financials:

    • Number of Employees: 760

    • Institutional Investor Base: <80%

    • AUM

      • Public credit: $22B

      • Private credit: $123B



Short-Term Implications


  • Synergies: BlackRock’s acquisition of HPS will create immediate synergies by leveraging BlackRock’s extensive corporate relationships alongside HPS’s expertise in private credit origination and capital flexibility. This enables the combined firm to provide integrated public and private income solutions, enhancing client liquidity, yield, and diversification.


  • Revenue Diversification: The acquisition will allow BlackRock to diversify its revenue streams beyond passive ETF investments, addressing the challenge of razor-thin margins in its traditional business lines. This diversification positions the firm for stronger financial performance in the short term.


  • Market Sentiment: Investor sentiment is likely to remain positive, as the deal signals BlackRock’s commitment to strategic growth areas, aligning with CEO Larry Fink’s stated focus on private credit as a future driver of the firm's success.



Long-Term Strategic Upsides


  • Revenue Expansion: The acquisition is expected to significantly bolster BlackRock’s private credit assets under management (AUM), enabling long-term revenue growth as businesses increasingly turn to private capital for funding amid stricter banking regulations.





  • Profitability Gains: HPS’s high-margin private credit business will improve BlackRock’s overall profitability, balancing its lower-margin passive investment products. Comparable publicly traded companies to HPS, such as Blue Owl Capital and Ares, have seen impressive gains of 55% and 46% respectively in 2024, driven by a significant surge in their AUM over the past decade. These gains are well ahead of BlackRock’s 25.7% in 2024. Additionally, the firm is likely to achieve operational efficiencies over time by integrating HPS into its global platform.





  • Economic Resilience: By expanding into private credit, BlackRock is better positioned to navigate economic challenges associated with high U.S. government debt and wide deficits, aligning with Larry Fink’s strategic vision for the firm.



Risks and Uncertainties


  • Regulatory Hurdles: The acquisition, expected to close in mid-2025, is subject to customary conditions, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other regulatory approvals. Any delays or challenges in meeting these conditions could postpone or alter the transaction terms, particularly if antitrust concerns are raised about BlackRock’s increased market share in private credit.


  • Competitive Pressure: BlackRock faces stiff competition in the private credit space from established leaders like Ares and Blue Owl Capital, which have demonstrated their ability to drive impressive growth in AUM and shareholder returns. If BlackRock cannot leverage HPS to close this competitive gap, it risks falling further behind these peers in this high-growth asset class.



Key Takeaways


  1. Strategic Rationale and Industry Impact: BlackRock’s acquisition of HPS, expected to close in mid-2025, positions the world’s largest asset manager to capitalize on the rapidly growing private credit market, projected to reach $2.6 trillion by 2029. This move aligns with BlackRock’s long-term strategy to diversify revenue streams and counteract the small margins in its core passive investment products, strengthening its competitive positioning against industry leaders.


  2. Financial and operational synergies: When the agreement became definitive, BlackRock’s share price was boosted by 4.4% over the following 13 days. This shows optimism for when the deal is finalised as it means Blackrock should expect their share value to increase again. By combining BlackRock’s corporate relationships with HPS’s private credit origination expertise, the firm will provide integrated public and private income solutions, enabling growth in assets under management (AUM) and enhancing profitability over the long term.


  3. Risks and how they might be mitigated: The transaction faces regulatory scrutiny under the Hart-Scott-Rodino Antitrust Improvements Act, integration challenges, and competitive pressure from rivals in the private credit space that outperformed BlackRock overall, in 2024 (e.g., Ares and Blue Owl Capital, with stock gains of 46% and 55%, compared to BlackRock’s 25.7%). Mitigation strategies include achieving synergies quickly to justify the huge cost, maintaining operational alignment during integration, and leveraging HPS to close the competitive gap in private credit.


Sources



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