BlackRock Fund's First Big Private-Equity Deal Is a Sign of What's to Come
August 12 2019 - 8:50AM
Dow Jones News
By Dawn Lim
BlackRock Inc. declared its ambitions in private equity with the
first deal from a new closely watched fund.
The money manager on Sunday said it purchased a stake in
Authentic Brands Group, which owns brands including Sports
Illustrated, Juicy Couture and Nine West, and controls licensing
rights of celebrity brands from Muhammad Ali to Marilyn Monroe. The
world's largest money manager led the $875 million investment in
Authentic Brands, which values the business in excess of $4
billion, according to people familiar with the matter.
BlackRock is now its biggest investor.
BlackRock Chief Executive Laurence Fink met with the two top
executives of Authentic Brands in the lead-up to the deal, quizzing
them on the business and offering referrals during a nearly
two-hour conversation, people close to the situation said.
Investing in a brand-licensing company allows BlackRock to tap
into changing patterns in consumer spending while reducing the
risks of having to back brick-and-mortar retailers directly, said
André Bourbonnais, a former chief executive of a Canadian pension
fund who heads BlackRock Long Term Private Capital.
BlackRock grew from a small offshoot of private-equity firm
Blackstone Group to the world's largest money manager. The $6.8
trillion firm is a financial superstore offering everything from
funds to portfolio construction tools to software for Wall
Street.
In recent years, a crop of family offices, sovereign-wealth
funds and other investment companies structured to hold private
firms for as long as they want have become bigger forces on Wall
Street. They are part of a radical shift in capital markets that
has let companies such as Authentic Brands stay private longer.
BlackRock hopes the deal will be the first in a series that will
help the firm close the gap with private-equity rivals -- and drive
new momentum for a new fund designed to hold stakes for the long
haul.
BlackRock hasn't made a purchase out of the new private-equity
fund until now. The firm set out to raise at least $12 billion in
2018; it has disclosed $2.75 billion in commitments so far. Some
institutions were uncomfortable tying up money in a fund with no
deadlines for returning investor money or a proven track record of
deals.
Authentic Brands has snapped up consumer labels and is looking
to buy more brands of health-and-wellness companies. More recently,
it has also explored buying the intellectual property of Barneys
New York Inc. with an eye on exporting and reviving the
department-store brand, a person said.
BlackRock's long-term private capital fund is investing $625
million. All existing backers from General Atlantic to former
basketball star Shaquille O'Neal are staying invested in Authentic
Brands. Meanwhile new ones, such as Singapore sovereign wealth fund
GIC, have come in, said a person familiar with the matter.
With the deal landscape getting more frothy, the team is
focusing on companies its dealmakers have followed for years, Mr.
Bourbonnais said.
Authentic Brands Chief Executive Jamie Salter said his
relationships with three Canadians behind the fund span years. "I'm
a Canadian," he joked. "The Canadians stick together."
Mr. Bourbonnais is one of them. So is Colm Lanigan, a recent
hire from the Abu Dhabi Investment Authority who helped seal the
deal, as is Mark Wiseman, who leads BlackRock's active equities and
who was a major architect of the fund.
Mr. Wiseman is a contender for the role as future CEO of the
firm, said people familiar with the matter.
BlackRock and other asset managers are locked in an intensifying
battle for dealmakers. To help retain talent, the firm said in an
August regulatory filing it will tweak how it pays a group of
senior employees and tie their pay more closely to the returns of
its illiquid funds.
Its alternatives arm cycled through various leaders in the past
years. The new bosses of the group embarked on a listening tour
this year to gather feedback from employees to improve how the
business is run, said a person familiar with the matter.
The firm had $67.9 billion in assets in illiquid alternatives in
June, up from $50.7 billion a year ago. These assets span energy
pipelines, loans and other nontraditional strategies and were a
cash engine for their small imprint within the firm: They made up
roughly 2% of assets BlackRock managed and generated about 9% of
revenue in 2018.
(END) Dow Jones Newswires
August 12, 2019 08:35 ET (12:35 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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