The golden age of independent managers is over

BlackRock’s $12.5bn acquisition of GIP takes consolidation to new heights, underlining infra’s skyrocketing popularity.

We wrote recently in one of our 2023 themes of the year pieces that infrastructure managers had become a larger M&A target. But we’re not going to lie: we didn’t expect BlackRock would buy Global Infrastructure Partners for a cool $12.5 billion. And judging from the market’s reaction, neither did you.

This deal is so transformational – for manager acquisitions in general and the asset class in particular – that it’s hard to know where to start. So how about here: BlackRock’s acquisition of GIP marks the end of the golden age of independent infra managers.

Right on cue, private equity firm General Atlantic confirmed its rumoured acquisition of Actis on Tuesday, to become its sustainable infrastructure arm.

The writing had been on the wall for a while, and you had only to look at the lengthening list of manager buyouts, IPOs and smaller stake sales to conclude that the truly independent, management-owned firm was a dying breed. But when the biggest of them all gets scooped up, you know it’s game over.

GIP was the only independent manager in the top five of our Infrastructure Investor 100 ranking of the world’s largest equity managers, which topped $1 trillion in 2023. Above it, stood Brookfield and Macquarie; below it, KKR and EQT. From now on, there will be no independents in the upper echelons.

BlackRock ranked a distant 13 in our latest II 100 – not exactly where you’d expect to find the infra business of the world’s largest asset manager. GIP’s purchase changes that. In one fell swoop, their combined infra units (‘BlackRock Global Infrastructure Partners’?) would sit within a hair’s breadth of Macquarie in last year’s ranking.

The deal also underlines the asset class’s skyrocketing popularity. Driven by the unbeatable – and increasingly intertwining – tailwinds of the energy transition and digital infrastructure, its essential nature was underlined by covid, with the change in our macroeconomic regime putting the spotlight on infrastructure’s ability to pass through inflation.

BlackRock chief executive Larry Fink couldn’t have been clearer, telling CNBC last week: “We believe the future in private markets is going to be infrastructure.”

That is a momentous statement, likely to accelerate manager M&A and prompt many LPs to recalibrate their allocations. These days, only private credit rivals infra in popularity, our forthcoming 2024 LP Perspectives study shows.

So, how well positioned is BGIP to capitalise on a future made up of private credit, the energy transition, and digital infrastructure?

When it comes to private credit, BlackRock is clearly the bigger fish, topping the latest edition of our II Debt 30 ranking of the top credit managers in the world – GIP sits at number 10. On the energy transition front, GIP is one of the largest renewables investors out there. Ditto for midstream, in traditional energy. In fact, GIP has $33 billion of unrealised energy investments across its funds, according to a BlackRock presentation on the deal. Both are areas of strength for BlackRock too, so the new unit will immediately be an energy behemoth. And digital? It’s no secret GIP hasn’t been an early mover in that space – with $6 billion of unrealised investments – though it’s been ramping up with the kind of scale it’s accustomed us to.

Chief executive Adebayo Ogunlesi told us Friday he had been looking for a way to accelerate GIP’s growth. Right off the bat, BGIP is the world’s biggest debt fundraiser and equity’s second-largest, with $26 billion and $92 billion, respectively, raised over the last five-year period covered by our rankings. Things look different on an AUM basis, with the likes of Brookfield boasting $250 billion of infra AUM, well above the $150 billion AUM of BlackRock and GIP’s combined units. But assuming the cultural fit is there, world domination is – if not a certainty, given the heavyweight competition – well within sight.

What is more certain by the year, though, is that this really is infrastructure’s decade, as we’ve been auguring since 2020.

So, rejoice: the future looks bright – if not very independent.