Managing money is a good business. Gatekeeping data might be a better one. On Monday, BlackRock announced its $3.2bn acquisition of Preqin, a 20-year-old, UK-based company that tracks tens of thousands of private capital firms around the world.
BlackRock’s enterprise value is $120bn. The company best known for its dominance in passive public market strategies can easily afford to swallow Preqin, even though it must issue new debt to fund the transaction.
The price implies a juicy 13 times multiple on the target’s 2024 estimated revenue. In 2016, Morningstar paid just seven times revenue for another well-known private markets data firm, PitchBook, valuing the latter at $225mn.
Private markets are suddenly a priority for BlackRock, which paid a hefty $12.5bn this year to buy the asset manager, Global Infrastructure Partners. For all the power BlackRock wields with its $10tn of assets managed, all it really wants to be is a S&P or Moody’s.
S&P Global and Moody’s have enterprise values of $154bn and $82bn respectively. Each trades at about 12 times forward revenue, respectively. BlackRock trades at just six times. S&P and Moody’s between their corporate ratings, licensed indices and data in essence have captive subscription fees that seem immune from market swings.
BlackRock has furiously tried to position itself as a technology and analytics company, particularly hyping up its Aladdin platform. Its hope is that as private markets both grow and mature, they will need to standardise. Preqin can then become the winner-take-all benchmark.
“Technology services” revenue in 2023 at BlackRock of a meaningful $1.5bn was still only a tenth of management fees recorded. But on Monday, executives spoke of business model “diversification” and the hopes of driving BlackRock’s multiple higher amid the revenue synergies they expected from Preqin.
BlackRock presciently acquired the iShares segment out of Barclays 15 years ago just as index fund investing was about to take off. BlackRock has already compared the Preqin deal to that fortuitous transaction.
Expensive, aspirational deals are trickier when the opportunity cost of risk capital is so high in an era of elevated interest rates. Data has proved to be good business. Even so, the Preqin price is going to be a tough sell to BlackRock’s public market shareholders.
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