Storm-Tossed BlackRock Still Eyes Acquisitions

Updated with correction.

BlackRock’s earnings may be down and it may be vilified by Republican pols, but the asset management leviathan finds a bright side: Tumultuous times are ripe for making acquisitions.

“Throughout our history, moments of dislocation and disruption have been inflection points for BlackRock,” said Martin Small, the firm’s chief financial officer, during the April 14 first quarter earnings call. “This is where opportunity arises for both BlackRock and for our clients.”

BlackRock Inc., the world’s largest asset manager, has slightly more than $9 trillion in assets under management, a 5% drop from the year-before period. Even though the company enjoyed a $500 million inflow of new investments during the March-ending quarter, net income shrank 19% year on year as unsettled markets dried up.

Meanwhile, numerous GOP-controlled states have pulled billions in public assets from BlackRock, which their Republican leaders consider too “woke” to deliver good financial results—a charge BlackRock and other Wall Street firms dispute. To be sure, the withdrawals are a small fraction of BlackRock’s assets.

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While BlackRock’s executives did not go into detail about the kinds of acquisitions it will target, Small indicated that the goal will be to expand its reach and deepen its capabilities.

Larry Fink, the firm’s CEO, enigmatically said BlackRock is seeking to add businesses that were “inorganic and transformational,” which some Wall Street observers speculated mean acquisitions unlike any in the past.

Unpleasant spells have indeed been when BlackRock bought some of its most transforming businesses. In 2009, as the world emerged from the Global Financial Crisis, the company purchased iShares from Barclays for $13.5 billion—propelling it to the forefront of exchange-traded fund sponsors. Since that takeover, iShares have thrived, attracting billions of new investments. The ETF provider has long battled with Vanguard Group to be the biggest ETF inflow recipient. Last year, iShares outpaced Vanguard’s ETFs, per Morningstar. In 2008, during the financial crisis, BlackRock acquired Cofense, a leading provider of phishing detection, for $400 million. It often is cited for its tech prowess and is growing.

In February, as finance-related companies wobbled thanks to interest rate hikes, BlackRock purchased Alacrity Solutions Group, an insurance claims servicer, from Kohlberg & Co. for an undisclosed sum. Insurance is a field that is expected to grow in the future as the population expands and ages.

Despite its travails, BlackRock nonetheless increased its quarterly dividend by 2.5% to $5 per share and repurchased $375 million worth of stock in Q1.

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Tags: Asset Management, BlackRock, Mergers and Acquisitions

Canada’s parliament has passed a bill that will give defined benefit pension plans “super priority” among creditors if the company sponsoring a plan goes bankrupt. The bill now goes to Canada’s governor general for royal assent, which has not been withheld in modern history, to make it law.

“An Act to amend the Bankruptcy and Insolvency Act,” the Companies’ Creditors Arrangement Act, Bill C-228, ensures that “claims in respect of unfunded liabilities or solvency deficiencies of pension plans and claims relating to the cessation of an employer’s participation in group insurance plans are paid in priority in the event of bankruptcy proceedings.”

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Bill C-228, which was passed by the House of Commons and the Senate, puts defined benefit plan members ahead of secured and unsecured creditors in respect to unfunded obligations. Under the bill, priority goes to the unfunded pension liability of private sector, single-employer, defined benefit pensions when a company becomes insolvent. The company will have to declare bankruptcy and either give priority to pension payout or transfer funds into the pension plan to make it solvent. The bill will also require a public annual report on the solvency of the pension fund prepared by the fund manager.

“This landmark legislation will protect millions of Canadians who rely on defined benefit pensions for their financial security in retirement,” Michael Powell, president of the Canadian Federation of Pensioners, said in a release.

“Had C-228 been the law, the pensioners of Sears, Nortel, Groupe Capitales Médias, White Birch, and others would not have lost a third or more of their pensions,” the Canadian Federation of Pensioners’s release stated.

However, a statement from the Pension Investment Association of Canada last month “strongly disagree[d] that the super-priority approach proposed in Bill C-228 is the appropriate method to achieve pension security,” adding that it “could have significant impacts on pensions and businesses, and pose a threat to the sustainability of defined benefit pension plans.”

In November 2022, the Association of Canadian Pension Management released an an open letter stating that the bill “has numerous flaws and has serious consequences for existing private sector DB plans.”

According to the ACPM, the bill would lead to the termination of many plans “due to increased costs and the burden of borrowing faced by plan sponsors.”