BlackRock leaped closer to making itself central to the entire asset management industry with another acquisition this weekend.
On Sunday, BlackRock announced that it acquired the private markets data and research firm Preqin for $3.2 billion in cash, a deal that the asset manager said is “transforming” and “adds a highly complementary data business to BlackRock’s investment technology, marking a strategic expansion into the fast-growing private markets data segment.”
The plan is to combine Preqin’s widely used data and research tools with Aladdin, BlackRock’s portfolio management platform that is now used by more than 1,000 organizations for some or all of their investment processes. Together, they will create a platform and workflow that will be a first in the private markets, according to the asset manager.
Preqin was a sizable business in its own right, with more than 4,000 relationships across general partners, limited partners, and service providers and about $240 million of recurring revenue.
“Together with Preqin, we can make private markets investing easier and more accessible while building a better-connected platform for investors and fund managers. This presents a substantial opportunity for Aladdin to bridge the transparency gap between public and private markets through data and analytics,” Sudhir Nair, global head of Aladdin, said in a statement.
Other alternative asset managers tout their own proprietary risk management platforms and databases that help inform their investing, but the vast majority don’t offer those things as a service to others. Platform-based business models, however, are expected to be adopted by more asset managers as they look to build stronger client relationships and revenue streams.
Private markets are expected to reach nearly $40 trillion by the end of the decade and the addressable market for data on them is estimated to be a total of $8 billion and growing 12 percent per year (reaching $18 billion by 2030), according to BlackRock. Institutional investors and family offices continue to invest heavily in private markets and wealthy private investors are slowly investing more in those asset classes. “There is an even greater need for standardized data, benchmarks, and analytics that enable investors to better incorporate private asset classes into portfolios and provide fund managers with better data and tools to deliver outcomes for clients,” BlackRock said in a statement about the Preqin deal.
Brad Haller, a partner at consulting firm West Monroe who has led more than 500 post-merger integrations for private equity firms and strategic buyers, said BlackRock can potentially sequester information for their own personal use as well as for customers using Aladdin. “This is a trend we are seeing as private equity firms are looking to data to improve their investing decisions. Having access to controlled data that you can monetize is powerful. Given the slow IPO markets, private asset information is only going to increase and clearly BlackRock sees this as well,” Haller said.
BlackRock has also been an active acquirer of asset managers. Last summer, after it cannonballed into the venture debt market with the acquisition of London-based asset manager Kreos, analysts expected more deals would follow, and they have. In January, BlackRock acquired Global Infrastructure Partners, one of the world’s biggest independent investors in roads, airports, utilities, and other projects, for $12.5 billion in cash and stock — its biggest deal in 15 years. In March it also acquired the remainder of SpiderRock Advisors, a leading provider of customized option overlay strategies in the U.S. wealth market.
“BlackRock’s vision has always been to bring together investments, technology, and data to offer solutions that meet our clients’ needs across their whole portfolio. As clients increasingly evolve their focus from choosing products to constructing portfolios, this shift requires technology, data, and analytics that create a ‘common language’ for investing across both public and private markets. We see data powering the industry across technology, capital formation, investing, and risk management,” Robert Goldstein, chief operating officer of BlackRock, said in a statement.
“Every acquisition has been an opportunity to strengthen our capabilities for clients — and in fact, we have been a client of Preqin for many years, and we look forward to welcoming the talented Preqin team to BlackRock,” he added.
The deal for Preqin might not be the last like it either, according to Haller.
“It is very possible that BlackRock will continue investing in the data provision space given their size and scale. They have the ability to capture and disseminate information better than anyone else within the financial services space,” Haller said.
