BlackRock is set to acquire global credit investment manager HPS Investment Partners in a deal valued at approximately US$12 billion (S$18 billion) as it continues to strengthen its capabilities in alternative and private markets.

This marks BlackRock’s third deal in this space this year, following the acquisition of Preqin in July and more recently Global Infrastructure Partners (GIP) in October.

Founded in 2007, HPS manages a variety of strategies across the capital structure, including privately negotiated senior debt, liquid credit and asset-based finance and real estate, managing approximately $148 billion in client assets.

In an announcement on Tuesday, BlackRock confirmed it will acquire 100 percent of HPS, with 100 percent of the consideration paid in BlackRock equity.

The equity is issued by a wholly owned subsidiary of BlackRock, SubCo Units, and is exchangeable on a one-for-one basis into BlackRock common stock.

About 9.2 million SubCo units will be paid upon closing and approximately 25 percent of the consideration, or 2.9 million SubCo units, will be paid after five years, subject to the achievement of certain conditions after closing.

Following the transaction, the combined entity will hold approximately $220 billion in client assets.

According to BlackRock, the combined private credit franchise will work side-by-side with BlackRock's $3 trillion public fixed income business to provide both public and private income solutions for clients across their portfolio.

"We have always strived to position ourselves in front of the needs of our customers. Together with the scale, capabilities and expertise of the HPS team, BlackRock will provide clients with solutions that seamlessly blend public and private,” said Lawrence Fink, Chairman and CEO of BlackRock.

The transaction is also expected to increase paid private markets assets under management and management fees by 40 percent and approximately 35 percent, respectively, and be modestly accretive to BlackRock's adjusted earnings per share in the first full year following closing.

With the deal, the firms are set to form a new Private Equity Solutions business unit led by HPS founders Scott Kapnick, Scott French and Michael Patterson.

The combined platform will have broad capabilities in senior and junior credit solutions, asset-based finance, real estate, private placements and secured loan obligations and will bring together direct lending, funds of funds and BlackRock GP and LP solutions (fund of funds, GP/LP secondary, co-investments).

This combination, BlackRock said, creates an "integrated solution" for corporate and asset-based financing, investment and non-investment grade and private credit.

Kapnick, French and Patterson will join BlackRock's global executive committee, and Kapnick, who is CEO of HPS, will be an observer on BlackRock's board.

"Today marks an important milestone in our quest to become a leading global provider of private finance solutions. Our partnership with BlackRock will further strengthen our position in this fast-growing but increasingly competitive market,” Kapnick said.

"The combination of HPS's proven culture of investment discipline with BlackRock's global reach will enable us to capitalize on new opportunities for our investors and employees and set us up for continued success in the next decade and beyond."

The transaction is expected to close in mid-2025, subject to regulatory approvals and customary closing conditions.

Looking ahead, BlackRock noted that sustained global growth will require greater volumes of debt financing, with markets increasingly looking to private equity as the answer.

"The addition of HPS will position BlackRock to connect companies of all sizes, from SMEs to large corporations, with financing for investments that support economic growth and job creation," BlackRock said.

It predicts that the private debt market will double to US$4.5 trillion by 2030.

It currently manages nearly $90 billion of private debt assets to clients in core middle market direct lending led by sponsors and non-sponsors in the US, Europe and Asia; risk lending; investment grade private placements; real estate debt; and private infrastructure debt.

Fink said: “For more than 35 years, BlackRock has grown and evolved with the capital markets. With GIP, and now HPS, we are expanding our private markets capabilities across our comprehensive global platform.

“Our Aladdin technology, including eFront and soon Preqin, will make access to private markets simpler and more transparent. These capabilities, along with our global reach, deep relationships and powerful technology, distinguish our ability to serve clients.”