Corporate MovesApril 21, 2023

Storm-Tossed BlackRock Still Eyes Acquisitions

The world's biggest asset manager has expanded in the past when times were tough, its executives say.

Reported by Larry Light

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.

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.