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Introduction

BlackRock's December 2024 investor presentation announcing their $12 billion acquisition of HPS Investment Partners showcases how the world's largest asset manager positions a transformative deal to its investor base. This strategic move represents more than just an addition to BlackRock's product suite - it's a calculated leap to establish dominance in one of asset management's fastest-growing segments: private credit.

What stands out in this presentation is BlackRock's masterful balancing act between presenting cold financial metrics and painting a compelling strategic vision. Rather than overwhelming investors with technical details or waxing poetic about vague synergies, the presentation weaves together market opportunity, strategic fit, and financial impact into a coherent investment narrative.

Let's dissect this presentation slide by slide to uncover the strategic thinking behind this major acquisition and extract lessons from BlackRock's approach to communicating this significant transaction.

Accelerating private credit capabilities and scale

Right from the opening slide, BlackRock establishes both the strategic rationale and financial impact of acquiring HPS Investment Partners. Through clearly delineated sections with distinct color coding, investors immediately grasp why this transaction matters.

"Leading the future of income solutions" isn't just a catchy heading - it's BlackRock's declaration that this deal creates a "top-five private credit manager with enhanced ability to serve clients." The combined platform's ~$220B in pro-forma private credit client assets, alongside BlackRock's existing $3T public fixed income platform, positions them as "an industry leader in providing income solutions across public and private markets."

Addressing a critical concern in any asset management acquisition - talent retention - the second section highlights that three HPS leaders will join BlackRock's Global Executive Committee. The 100% equity consideration structure with a substantial retention pool demonstrates commitment to long-term alignment, a crucial factor for investors worried about post-acquisition departures.

For shareholders focused on bottom-line impact, the "Attractive financial transaction" section delivers concrete metrics: accretion to organic growth and as-adjusted EPS in the first year, expected financial contributions, and a compelling 16% IRR. By contextualizing the ~30x 2025E P/FRE multiple as "in-line with premium private markets franchises," BlackRock preemptively addresses potential valuation concerns.

This comprehensive yet concise opening effectively answers the three questions at the top of investors' minds: Why this deal? How will you keep the talent? What's the financial impact?

Secular tailwinds are propelling growth and client opportunities

Having established the acquisition's rationale, the presentation shifts to market context with compelling data on private credit's explosive growth trajectory. Visually striking charts show private credit AUM soaring from $1.0T in 2020 to a projected $4.5T+ by 2030 (a 2.6x increase from 2023), while emphasizing this represents "just a small portion of a much larger $35T+ TAM."

Instead of letting these numbers speak for themselves, BlackRock connects broad market trends to specific "factors creating opportunity for private debt" through color-coded panels. Each contains concrete data points substantiating the claims - retail private debt AUM growing 30% since 2022, institutions underallocated by ~200bps, 80% of insurers planning to increase or maintain private debt allocations, and sponsors increasingly preferring private debt for financing (58% of 2022 sponsor-backed M&A versus just 5% in 2013).

Beyond merely establishing market size, this slide demonstrates the timeliness of the acquisition. By highlighting accelerating retail demand, institutional underallocation, insurance needs, sponsor preferences, and banks' retreat from lending, BlackRock presents multiple tailwinds supporting sustainable market growth.

Market context transforms this acquisition from a simple scaling play into a strategic positioning move at the confluence of powerful secular trends - exactly what sophisticated investors want to see in a major transaction.

HPS Investment Partners overview

Moving from market opportunity to acquisition target, the presentation provides a comprehensive profile of HPS that effectively showcases why this particular firm deserves BlackRock's attention - and $12 billion.

"Scaled global private and public credit manager with strong track record of growth" serves as an apt introduction, followed by five bullet points with check marks that efficiently communicate HPS's key attributes: its scale ($148B in client assets), financial profile ($360M of 2025E post-tax FRE at nearly 50% margins), distinctive origination capabilities, retail positioning, and performance track record (~450bps of excess returns).

Particularly effective is how the slide highlights HPS's differentiators through specific metrics. The "Differentiated business model" section reveals HPS's unique approach with 60%+ non-sponsor origination (contrasting with most private credit firms' sponsor-dependence), global reach (28% invested outside North America), customization capabilities (40%+ AUM in customized solutions), client relationships (78% AUM from multi-product relationships), and institutional focus (68% AUM from insurance & pensions).

Concrete fundraising numbers validate HPS's market position: $21B Specialty Direct Lending VI, $17B Strategic Investment Partners V, and $10B Core Senior Lending II, along with a "#2 in fundraising over last 5 years" credential. These figures establish HPS as not just a quality firm, but a market leader worth significant investment.

Beyond establishing HPS's standalone quality, the slide subtly begins connecting the dots on complementary capabilities HPS brings to BlackRock - setting the stage for the strategic combination narrative to follow.

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Private credit AUM across BlackRock platforms

Before revealing the combined entity, BlackRock wisely provides context about its existing private credit capabilities. A circular visualization displays BlackRock's current $89B private credit client assets by strategy, offering investors a clear baseline for understanding what HPS adds to the equation.

Instead of downplaying their current position, BlackRock highlights their 20+ year track record, robust deal flow (2,000+ opportunities reviewed annually), global footprint (16 local offices), and substantial revenue base (~$450M in 2023). The "Scaled flagship franchises" section lists key products, demonstrating existing breadth across private credit strategies.

Rankings provide additional context: "#12 Ranked by AUM" and "#7 Ranked by 5-year fundraising" establish BlackRock as a credible player while suggesting room for advancement - precisely what HPS helps achieve. The statistic of "~$3T across public fixed income" reminds investors of BlackRock's massive fixed income platform, reinforcing the strategic logic of building complementary private credit capabilities.

This approach effectively positions the acquisition as strengthening an existing business rather than remedying a weakness - a subtle but important distinction for investor perception. By establishing their current capabilities before introducing the combination, BlackRock frames the transaction as building from strength rather than desperation.

Complementary combination makes BlackRock a top five private credit manager by AUM

Striking circular visualizations crystallize the complementary nature of this combination, showing how BlackRock's $89B and HPS's $148B client assets merge into a comprehensive ~$240B private credit platform. Color-coding makes it immediately apparent where each firm brings distinctive capabilities across the credit spectrum.

"Adding capabilities across credit spectrum..." isn't just a catchy phrase - it's supported by visual evidence showing how the combined entity will offer comprehensive solutions spanning direct lending, asset-based finance, high grade, junior capital solutions, liquid, opportunistic/growth, and multi-credit strategies.

Four bullet points succinctly capture the strategic benefits: consolidating ~$130B in direct lending and junior capital, increasing private markets FPAUM by 40% and base fees by ~35%, expanding capabilities across different client and borrower segments, and growing client reach with minimal LP overlap (just 6%).

The bottom-line impact appears in two powerful metrics: "Top five by private credit AUM" and "#2 by private credit fundraising" - clear benchmarks that transform BlackRock from a respectable player to a market leader in private credit.

What makes this slide particularly effective is how it moves beyond simple scale advantages to demonstrate genuine strategic complementarity. By showing minimal overlap in both strategies and clients, BlackRock makes a compelling case that this combination will create more value than the sum of its parts.

Opportunities for significant value creation via growth

Moving beyond the immediate combination benefits, this forward-looking slide outlines specific growth opportunities across four categories: Capital formation, Insurance offerings, Client solutions, and Strategic expansion.

Under "Capital formation," BlackRock highlights expanded credit offerings to upper middle market and larger corporates that complement existing relationships. The minimal LP overlap (approximately 6% in private credit) suggests significant cross-selling potential - a concrete synergy investors can grasp.

Insurance opportunities receive particular attention, positioning BlackRock as a "strategic capital partner to insurance clients ($35-40T TAM)" with enhanced capabilities to serve their existing $700B+ insurance client base through expanded IGPD offerings. The note that HPS's "Demonstrated balance sheet-lite scale avoids conflict with key client base" cleverly addresses a potential concern about competing with insurance clients.

"Client solutions" points to opportunities for enhanced credit offerings across the capital structure and better serving BlackRock's "$1T of multi-asset relationships" - a substantial built-in distribution channel for HPS products.

For longer-term growth, "Strategic expansion" outlines opportunities in asset-based finance, sponsor lending, EMEA direct lending, and secondaries, while highlighting HPS's "$20B+ retail private credit platform" as a gateway to the "fast-growing wealth segment."

By demonstrating specific cross-selling opportunities, client segment expansions, and product development possibilities, BlackRock shows investors this acquisition isn't merely about financial engineering but has multiple pathways to long-term organic growth.

Compelling value for BlackRock shareholders

Shifting from strategic vision to transaction mechanics, this slide delivers the financial details sophisticated investors need to evaluate the deal structure. Three clearly organized sections - Consideration, Unit structure, and Valuation - leave few questions unanswered.

Under "Consideration," investors learn the payment structure: approximately 12.1M BLK SubCo units (exchangeable 1:1 into BlackRock common shares), with 9.2M delivered at closing, 2.9M paid in 5 years subject to conditions, and potential for up to 1.6M additional units based on performance milestones. BlackRock also plans to retire approximately $400M of existing HPS debt.

The "Unit structure" section explains dividend eligibility (equivalent to BlackRock common stock), lockup periods (2-3 years for units paid at closing, 1-year for a portion of deferred units), and accounting treatment (reported in BlackRock's EPS as if exchanged for common shares).

Valuation details include the $12B nominal value (including the retention pool) and key metrics about the acquired business: ~$850M of 2025E base fees and $360M of post-tax 2025E FRE at nearly 50% margins. By noting that the implied ~30x 2025E P/FRE multiple is "in-line with premium private markets franchises now valued at 30-34x P/FRE," BlackRock contextualizes the seemingly high multiple against comparable transactions.

Particularly noteworthy is the disclosure that nearly 90% of distributable earnings come from FRE - a quality highly valued by public markets and justifying a premium multiple. This comprehensive financial breakdown gives investors the tools to independently assess the transaction's financial attractiveness.

Compelling value for BlackRock shareholders (cont'd)

Completing the transaction overview, this slide addresses governance, financial impact, retention, and timing considerations - leaving no significant questions unanswered.

Governance arrangements include three key HPS leaders joining BlackRock's leadership team, with Scott Kapnick becoming an observer to the BlackRock Board of Directors. A critical detail for governance-focused investors: "Each HPS shareholder receiving BLK SubCo units will execute a shareholders' agreement requiring that BlackRock shares be voted in line with recommendation of BlackRock's Board of Directors."

Financial projections confirm the transaction will be "Modestly accretive to as-adjusted EPS in first full year post-close" and "Accretive to long-term organic asset and base fee growth." The 16% IRR "well in excess of cost of capital" provides a clear benchmark for financial attractiveness. Reassuringly for income-focused investors, BlackRock plans to maintain its existing share repurchase and dividend policy, with no impact on leverage.

Addressing talent retention - crucial for asset management transactions - the slide notes that "HPS employees will retain significant carry and incentive fees in existing strategies" while highlighting the up to $675M retention pool to be paid in BlackRock shares, aligning incentives for the long term.

A mid-2025 expected close, subject to regulatory approvals and customary closing conditions, gives investors a clear timeline for completion.

This thorough approach to transaction details demonstrates BlackRock's commitment to transparency and thorough planning - qualities institutional investors highly value when evaluating major strategic moves.

Conclusion

BlackRock's presentation on the HPS Investment Partners acquisition exemplifies effective communication of a major strategic transaction. Several elements make it particularly effective:

Market context comes first, establishing private credit's explosive growth trajectory and multiple tailwinds creating a compelling opportunity. This frames the acquisition as a strategic positioning move rather than merely an expansion play.

Complementary capabilities receive significant attention, with clear visualizations showing how BlackRock and HPS create a comprehensive private credit platform with minimal overlap. This differentiation from simple scale acquisition helps justify the premium valuation.

Financial details appear transparently, from the $12B purchase price to expected earnings contribution, with appropriate benchmarking against comparable transactions. The structure emphasizing equity consideration and retention pools addresses talent retention concerns.

Value creation opportunities extend beyond immediate combination benefits to specific cross-selling strategies, product expansions, and client segment opportunities. This roadmap for growth demonstrates strategic thinking beyond the initial transaction.

Proactive addressing of potential investor concerns around talent retention, integration, governance, and financial impact shows thorough planning and consideration of stakeholder interests.

For companies communicating major acquisitions, BlackRock's approach offers valuable lessons in balancing strategic vision with financial detail, addressing stakeholder concerns, and articulating both the rationale and expected outcomes of a transformative transaction - all while maintaining a focused, investor-centric narrative.

See you next week!

PitckDeckGuy

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