In a significant move to enhance its private market portfolio, BlackRock has announced the acquisition of credit manager HPS Investment Partners for $12 billion in an all-stock transaction. This acquisition is the latest in a wave of General Partner (GP) consolidations that have dominated the mergers and acquisitions (M&A) landscape in 2024, signaling a transformative shift in the private equity and credit management industries.
Surge in GP-to-GP Consolidation
The HPS deal highlights a broader trend of GP-to-GP consolidation in the private equity sector. According to PitchBook’s latest Public PE and GP roundup, this type of deal activity has surged by nearly 94% year-over-year (YoY), marking a record high for M&A deals in the space. This year has already witnessed a sharp increase in consolidation, and with the BlackRock-HPS acquisition, the volume of GP transactions is set to nearly triple compared to previous years.
BlackRock’s acquisition of HPS aligns with the growing demand for large asset managers to scale their private market capabilities. This consolidation is primarily driven by the need to access larger pools of capital, expand into new investment areas, and offer a broader range of solutions to meet evolving investor preferences.
A Unified $220 Billion Private Credit Business
Upon completion of the transaction, BlackRock will merge its existing private credit business with HPS Investment Partners’ portfolio, creating a formidable private credit platform managing $220 billion in assets. The leadership team at HPS, which specializes in private credit investments, will continue to manage the combined entity, ensuring continuity in operations and strategic direction.
This consolidation allows BlackRock to strengthen its position in the fast-growing private credit market, an asset class that has seen increasing investor interest due to its ability to provide attractive returns in a low-interest-rate environment.
Industry Trends and Strategic Intent
BlackRock’s move follows a pattern observed across the industry, where large asset managers are increasingly turning to acquisitions as a means to expand their footprint and diversify their offerings. The focus on private credit is especially pertinent given the growing investor appetite for alternative investments that offer higher yields compared to traditional public equity markets. As institutions look to meet these demands, combining forces with established managers like HPS enables asset managers to capture a larger share of this burgeoning sector.
The acquisition also reflects the trend of financial firms consolidating their resources to increase scale and enhance their competitive position, both in the private equity and credit sectors. By expanding its private credit division, BlackRock is positioning itself as a key player in this space, catering to institutional and high-net-worth clients looking for differentiated investment opportunities.
A Record Year for M&A Activity in Private Equity
The ongoing wave of M&A activity in the private equity industry is reshaping the competitive landscape. With the total volume of GP-to-GP consolidation transactions expected to continue rising, 2024 is already on track to set new records for the industry. BlackRock’s acquisition of HPS is expected to further fuel this momentum, as other large asset managers follow suit to bolster their own private market operations.
Additionally, these transactions are indicative of a broader trend towards consolidation in the alternative investment sector, which remains a key area of focus for asset managers seeking to expand their market reach and diversify their portfolios.
Conclusion
BlackRock’s $12 billion acquisition of HPS Investment Partners is a strategic move that strengthens its private credit capabilities and expands its reach in the rapidly growing alternative investment market. The deal is part of a broader trend of GP-to-GP consolidations in 2024, highlighting the increasing pressure on asset managers to scale and adapt to the changing demands of investors. With $220 billion in combined assets under management, BlackRock is positioning itself for continued success in the competitive world of private markets, as firms across the industry consolidate resources to achieve greater scale and efficiency.
