Displaying items by tag: private equity

BlackRock has announced a $12 billion acquisition of HPS Investment Partners, a private credit firm led by former Goldman Sachs and JPMorgan executives. The deal highlights BlackRock’s push into private credit, a rapidly expanding $1.6 trillion market that has grown as banks retreat from leveraged lending. 

CEO Larry Fink emphasized the blending of public and private markets as a core feature of modern investing. The move aligns with BlackRock’s broader strategy to deepen its presence in alternative assets, following acquisitions of Preqin and Global Infrastructure Partners earlier this year. 

While some industry leaders, including JPMorgan’s Jamie Dimon, have raised concerns about risks in private credit, BlackRock sees significant opportunities for growth. 

Finsum: This acquisition could boost BlackRock’s effort to position itself as a leader in alternative asset management.

As investors brace for the effects of Donald Trump's second term, Scott Sperling, Co-CEO of Thomas H. Lee Partners, offers a fresh outlook on the private equity scene. Mark Rowan, CEO of Apollo Global Management, hints at pursuing strategic acquisitions to bolster the firm's growth, while maintaining a strong focus on its existing operations. 

Sperling foresees an uptick in economic expansion and reduced operational costs under the new administration, largely due to regulatory reforms. He reflects on the past few years, noting that stringent regulations have made deals like mergers and acquisitions more complex and costly.

 Sperling also highlights the recent pressure on major tech companies, as government scrutiny and antitrust actions could stifle innovation in key sectors. Nonetheless, he remains hopeful that private equity will thrive, despite the challenges posed by shifting political dynamics

Finsum: We anticipate both regulatory and policy changes to be friendlier to P/E in the new administration. 

Private equity's growing control of rental housing has sparked concern as rents continue to rise, prompting calls for scrutiny from lawmakers. Senator Elizabeth Warren, joined by three colleagues, recently questioned KKR on how its recent $2.1 billion investment in rental units across eight states will impact long-term tenants and rental rates. 

KKR asserts its investments provide high-quality housing, but critics argue these acquisitions contribute to rising costs and fewer homeownership opportunities for regular buyers.

A Harvard report shows that rents have surged far faster than household incomes, putting financial strain on tenants who are forced to limit spending on essentials. Vice President Kamala Harris and other leaders have also highlighted private equity’s role in pricing out individual buyers and impacting housing affordability. 

Finsum: This type of regulation will obviously depend on the election results but there is little doubt that the Harris administration will make large changes to housing. 

Private equity giants are increasingly turning to hands-on management of the companies they own as financial strategies alone are no longer sufficient. With rising interest rates and a slowdown in the deals market, firms like Goldman Sachs and Blackstone are bringing in seasoned industry veterans to boost operational performance. 

This shift focuses on enhancing profitability through measures like improving margins and increasing cash flow, rather than relying on the traditional method of multiple expansion. 

Private equity firms are also extending the holding periods of their investments, driven by the need to deliver returns to investors amidst a tougher economic climate. Companies are placing a stronger emphasis on building long-term strategic growth plans. 

Finsum: As interest rates and inflation rise, private equity is evolving to emphasize deeper involvement in company operations rather than relying solely on financial solutions.

Apollo Global Management secured $5 billion in funding from BNP Paribas as part of a move to expand its asset-backed lending business, traditionally dominated by banks. BNP’s commitment, which may increase over time, will support deals initiated by Apollo and its Atlas SP unit, which was acquired from Credit Suisse. 

Apollo aims to grow its credit business significantly, with plans to generate $200 to $250 billion in annual volume through its origination platforms within five years. The partnership reflects the growing presence of private credit in financial markets, where asset-backed lending has become more attractive due to its potential for higher returns. 

This funding boost adds to previous investments from the Abu Dhabi Investment Authority and MassMutual, further solidifying Apollo’s influence in private credit.

Finsum: We’ll see how the relative attractiveness of private credit plays out given interest rates might be falling.