BlackRock’s $12bn acquisition of HPS Investment Partners to reshape private credit landscape

BlackRock has entered into a landmark agreement to acquire HPS Investment Partners, a global credit investment manager overseeing $148 billion in assets. The $12 billion deal, entirely paid in BlackRock equity, is poised to create a formidable private credit franchise with approximately $220 billion in client assets under management. This move underscores BlackRock’s private markets ambitions to blend public and private market solutions, aiming to deliver seamless income strategies to its diverse clientele.

Revolutionising Private Credit Offerings

BlackRock, recognised for its expansive $3 trillion fixed-income platform, views the acquisition as a strategic step to enhance its private credit franchise. HPS Investment Partners, founded in 2007, has built a reputation for providing bespoke financing solutions across the capital structure. With an extensive origination network and robust investment discipline, HPS is set to bolster BlackRock’s private markets capacity to address the growing demand in the private debt market.

BlackRock anticipates that the private debt market will more than double to $4.5 trillion by 2030. The transaction aligns with this projection, positioning the combined entity to offer integrated financing solutions for insurers, sovereign wealth funds, and pension plans. The deal is expected to increase BlackRock’s fee-paying assets under management by 40%, with management fees projected to rise by approximately 35%.

Integrated Leadership and Strategic Alignment

HPS’s leadership team, including Scott Kapnick, Scot French, and Michael Patterson, will helm the newly formed private credit franchise under BlackRock. The platform will unite HPS’s expertise in senior and junior credit solutions, asset-based finance, and private placements with BlackRock’s private markets resources. BlackRock Chairman and CEO Laurence Fink highlighted the synergy, stating that the partnership would empower the firm to meet evolving client needs across public and private portfolios.

The deal also introduces structural measures to ensure leadership continuity and alignment with shareholder interests. SubCo Units, exchangeable into BlackRock common stock, will be issued to fund the acquisition. The transaction includes deferred payments contingent on financial performance milestones, along with an equity retention pool to incentivise employees at HPS Investment Partners.

Expanding Opportunities in Private Markets

As private capital becomes a critical driver of global economic growth, BlackRock’s acquisition of HPS reflects a strategic pivot toward becoming a full-service provider of integrated financing solutions. The combined platform will cater to a broad spectrum of financing needs, spanning small and medium-sized enterprises to large corporations. By leveraging HPS’s global credit investment capabilities and BlackRock’s proprietary technology, including Aladdin and eFront, the firm aims to simplify access to BlackRock’s private markets for its clients.

Scott Kapnick, CEO of HPS Investment Partners, expressed enthusiasm about the partnership, emphasising its potential to capture emerging opportunities in the competitive private debt market. He noted that BlackRock’s global reach and technological capabilities would enhance HPS’s capacity to deliver value to investors.

Deal Details and Regulatory Approvals

The acquisition terms include the issuance of 12.1 million SubCo Units, with a portion of the payment deferred for five years. BlackRock plans to refinance approximately $400 million of HPS’s existing debt as part of the closing process. The transaction, subject to regulatory approvals, is expected to close in mid-2025.

BlackRock projects that the acquisition will be modestly accretive to its adjusted earnings per share in the first full year post-close. The firm’s capital management strategy, which prioritises growth investments, aligns with its consistent track record of returning value to shareholders through dividends and share repurchases.

Future Implications for BlackRock

This acquisition represents a pivotal moment for BlackRock as it expands its foothold in private markets. By integrating HPS’s global credit investment expertise, the firm is set to redefine its offerings in the private debt market, addressing the growing demand for long-duration, high-yield investments. With its enhanced platform, BlackRock is poised to strengthen its role as a leader in integrated financing solutions, driving long-term growth and diversification for its clients and shareholders.