BlackRock (NYSE: BLK) just made a move to expand its reach into private market investing. The investment firm has announced plans to acquire Preqin, a leading private markets data provider. The price: $3.2 billion in cash. This acquisition is a strategic move to enhance BlackRock's private markets capabilities. The company aims to integrate investments, technology, and data across its portfolio.

The deal would combine Preqin's extensive data and research tools with BlackRock's Aladdin platform to create a comprehensive solution for fund managers and investors in private markets. This integration is expected to streamline investment processes, improve transparency, and help clients make more informed decisions.

Context Is King

As a money manager for institutional investors like public pension plans and corporations, BlackRock plays a key role in the wider stock market and the U.S. economy. Financial decisions made at that level impact vital enterprises and millions of individuals.  

The acquisition aligns with BlackRock's strategy to expand its presence in the private markets data segment, which has a projected $8 billion market, growing at 12% annually. The segment includes private equity, infrastructure, hedge funds, and real estate. It’s part of BlackRock’s efforts to offer comprehensive investment solutions and follows recent acquisitions like Global Infrastructure Partners, SpiderRock, and a joint venture with Jio Financial Services.

Preqin has a significant client base of over 4,000 relationships and is projected to generate $240 million in recurring revenue in 2024. The private markets sector is growing rapidly, and alternative assets are expected to reach $40 trillion by the end of this decade.

The Bigger Picture

While the deal is expected to slightly dilute BlackRock's operating margin and adjusted earnings this year, the company projects an estimated internal rate of return of 18%, which is well above the cost of capital. So far this year, its shares have underperformed, rising about 16% compared to the industry’s 26.3%. What are analysts saying about the company’s latest plans? They seem to be, for the most part, upbeat, with a consensus Strong Buy rating and an average price target of $910.67, suggesting more than 15% growth potential. The transaction is expected to close by the end of the year following regulatory approval.

Neither Sean Julie Stoller nor Stocks.News have positions in this company.