Good morning. My name is Jennifer, and I will be your conference facilitator today. At this time, I'd like to welcome everyone to the BlackRock Incorporated teleconference to discuss the acquisition of Preqin. Participants for today's call will include Chairman and Chief Executive Officer Laurence D. Fink, Chief Operating Officer Robert L. Goldstein, Chief Financial Officer Martin S. Small, Global Head of Aladdin Sudhir V. Nair, and General Counsel Christopher J. Meade. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer period. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, please press star, then the number two. Thank you. Mr. Meade, you may begin your conference.
Good morning, everyone. I'm Chris Meade, the General Counsel of BlackRock. Before we begin, I'd like to remind you that during the course of this call, we may make a number of forward-looking statements. We call your attention to the fact that BlackRock's actual results may, of course, differ from these statements. As you know, BlackRock has filed reports with the SEC, which lists some of the factors that may cause the results of BlackRock to differ materially from what we see today. BlackRock assumes no duty and does not undertake to update any forward-looking statements. With that, I'll turn it over to Larry.
Thank you, Chris, and good morning to everyone. Thank you for joining the call. We're very excited to announce our agreement to acquire Preqin. This acquisition is about driving evolution and growth in the private markets by measuring them, understanding their drivers of performance, and making them more investable. Think about how data, benchmarks, and risk analytics transform public markets. They made markets more accessible from the developed to the emerging, from stocks to bonds. They made investment performance and drivers of return much more transparent. They created risk models and alpha analytics that are indispensable to the investment process. They've grown durable, high-growth revenue pools that are adjacent to asset management, and they have generated enormous value for clients and shareholders. Our aim is to do all of that in the far less mature data analytics and index business for all the private markets.
By leveraging our investment capabilities, Aladdin, eFront, and eventually Big Data , we believe we could index the private markets. Just as indexes have become the language of public markets, we envision we could bring the principles of indexing, even iShares, to the private markets. We anticipate indexes and data will be important future drivers of the democratization of all alternatives, and this acquisition is the unlock. We've used acquisitions at BlackRock to execute business transformation and open up meaningful new growth markets for our clients and our shareholders. We acquired BGI and iShares to redefine whole portfolios, blending active and indexing to build better outcome-oriented portfolios. iShares AUM was about $500 billion at the end of 2009. Today, it's 8x higher at almost $4 trillion. We recently celebrated the five-year anniversary of the eFront acquisition, where ACV's growth has doubled since becoming part of BlackRock.
The combination of Preqin with Aladdin with eFront presents an opportunity to work towards a common language for private markets. By bringing together investments, tech, and data, BlackRock has the opportunity to reduce the gap between public and private markets and power the next generation of positive whole portfolio outcomes for investors. BlackRock is uniquely positioned to serve clients across our whole portfolios. Our platform is the most comprehensive in the industry, integrating across public markets, private markets, and our Aladdin Enterprise investment technology, our eFront private markets workflow technology, and soon Preqin's industry-leading alternative data. Today, private markets are the fastest-growing segment of asset management, and we see significant demand from our clients to do more in this space.
We've been on a mission to transform our private markets capability with our successful integration of eFront, our planned acquisition of Global Infrastructure Partners, and we're taking the next step today with Preqin. We are enriching BlackRock's growth potentials in private markets with industry-leading capabilities in investing and in technology and data. We believe this will deepen our relationships with clients and provide a whole new engine for premium, diversified, organic growth. Let me now turn to Rob and Martin to share some additional context on the transaction, and then we'll be happy to take your questions.
Great. Thank you, Larry. Before I start, I'd like to mention that we've posted an investor presentation with additional information about the transaction on the events and presentation section of our investor relations website. I think I speak for all of us here at BlackRock to say how excited we are to bring Preqin's data capabilities to our platform and to have Preqin's employees join our offices throughout the world. In combination with Aladdin, eFront, and the overall BlackRock platform, the opportunities that Preqin unlocks are something that we've been thinking through for a very long time. We've delivered consistent industry-leading growth by investing ahead of emerging trends and ensuring we have the right solutions for our clients as their needs evolve. We've intentionally organized ourselves to serve clients across their entire whole portfolio.
Whether that's through an entire outsource solution or tailored portions of it, we bring a differentiated approach across investment management, technology, and risk. BlackRock was built to help catalyze growth in the capital markets, particularly in fixed income and structured products. The core of that vision was always centered on an integrated ecosystem of technology, data, and analytics. If you can't properly analyze an investment, you don't understand it. We view our strategy as not about asset management or tech or data standalone, but rather about the creation of a full solution with BlackRock helping our clients across all aspects of their investing needs. Across the whole portfolio, we have strong conviction that private markets will continue to become increasingly important to capital markets, our industry, and to BlackRock.
Our planned acquisition of Global Infrastructure Partners will transform our private markets platform, doubling private markets base fees and adding approximately $100 billion of assets under management focused on infrastructure, which is predicted to be one of the fastest-growing segments of private markets. We are also a leading private markets technology and analytics provider with the fastest-growing part of our tech business, driven by the ability to provide transparency and workflow solutions across both the public and the private markets. But while private markets assets and demand are growing significantly, the current state of private markets investing is well ahead of the underlying technology infrastructure. There is a large gap in private asset transparency relative to the public markets. We believe this gap will be narrowed with technology and data for the benefit of our clients and the industry.
In fact, we believe that narrowing this gap will ultimately increase private markets allocations. We also believe our work will benefit investors and alternative asset managers by making private markets more investable. We've been on a journey to catch up, not to catch up to anyone else, but rather to what our clients and the industry require for success: a scaled solution encompassing both workflow and data. That mission led us to acquire eFront in 2019 and, importantly, to invest more in those private markets capabilities, not less. We believe eFront was a starting point, and we're growing that business in multiple ways. We're extending the growth of existing products. We're innovating new capabilities, and we're ultimately serving as the leading whole portfolio provider, offering best-in-class tools across public and private markets technology.
Today's announcement of our acquisition of Preqin represents the key next step in our transformation of private markets and technology, helping to complete the whole portfolio by delivering the industry-leading high-quality data set that is seamlessly integrated into workflows. We think that's ultimately the unlock to drive increased accessibility, efficiency, and growth in the private markets. Preqin is a global data provider serving the private markets industry with data and research capabilities. Since its founding in 2003, the firm has grown to serve over 4,000 clients across general partners, limited partners, and related service providers. It has comprehensive global coverage of 190,000 funds, 60,000 fund managers, and 30,000 private markets investors. Preqin is expected to add approximately $240 million of annual recurring revenue and has a strong track record of approximately 20% ACV growth in the last three years.
In addition to offering clients the benefit of holistic multi-asset class technology and data, we will continue to offer clients of Preqin as a standalone solution as well. Private markets today lack standardized high-quality benchmarks for asset allocation, performance measurement, and investing. This combination will help build that at scale. Our vision is for data to enable a network across BlackRock and ultimately the industry of technology, capital formation, investing, and risk management. The combination of Preqin with our existing capabilities through Aladdin and eFront presents an opportunity to define a common language for private markets. We've always had a dream of Aladdin being the language of portfolios. Preqin will bring together investments, technology, and data to reduce the gap between public and private markets analytics, reporting, and transparency, and we believe will power the next generation of whole portfolios, all for the benefit of our clients.
Looking ahead, we see an opportunity for clients to seamlessly integrate workflows between the private and the public markets assets they hold across portfolio management, risk management, and importantly, now data. We're aiming to serve our clients more efficiently, serving as a strategic partner across their entire investment management process. Today on Aladdin, we model over 100,000 public market benchmarks that help investors make informed decisions and power world-class portfolios. We envision a world where we bring that level of precision, discipline, and transparency to private markets portfolios. We look forward to doing it with our new partners at Preqin. I'll turn it over to Martin now to cover the financial rationale and value of this transaction for our shareholders.
Thanks, Rob. Today's announcement of our agreement to acquire Preqin marks both an extension of our private markets capabilities and a launching point into the adjacent fast-growing private markets data segment. We expect it will accelerate the growth and revenue contribution of our technology services business. We believe the transaction will deliver meaningful shareholder value through accelerating annual contract value growth and adding highly recurring revenue that's less sensitive to capital markets fluctuations. It will triple Aladdin's desktop reach. It can unlock a fast-growing $8 billion private markets data TAM, which we expect to more than double by 2030. And it will support opportunities to innovate new data products and drive better outcomes for clients. As we look to evolve Aladdin for the next generation of the whole portfolio and expand beyond our current TAM, we see data as a complementary adjacent revenue pool.
We expect our clients to benefit from access to integrated private markets investment workflows and data. For our shareholders, we believe the Preqin acquisition will bring revenue and earnings diversification less tied to capital markets activity. Through strong organic growth and scaling of our private markets and investment technology platforms, both of which fuel stable earnings growth, we believe we can drive multiple expansion for our shareholders. Turning to the financial terms of the transaction, we plan to acquire 100% of the Preqin business for total consideration of GBP 2.55 billion, or approximately $3.2 billion in cash. BlackRock expects to fund the transaction through up to $3 billion in additional debt, which would increase our leverage ratio to 1.4x. We expect the transaction to be modestly diluted to as-adjusted EPS and margin in 2025, which will exclude transaction-related costs.
At present, we expect the transaction to close before year-end 2024, subject to regulatory approvals and other customary closing conditions. Primarily through growth, we see opportunities to generate significant revenue synergies in the years ahead. Much of these we expect to be derived from building more comprehensive databases and by increasing sales through our complementary distribution networks and partnership channels. The bigger, longer-term opportunity is leveraging our engines in Aladdin and indexing with our capital markets expertise to build the machine for the indexing of private markets. What the creation of public benchmarks did to drive stock markets, especially visible through iShares, we believe the combination of BlackRock and Preqin can do for private markets. BlackRock has a compelling track record of executing strategic transactions, integrating them well, and earning a strong return on use of shareholder capital.
Since the eFront acquisition in 2019, we've doubled the ACV of the business. In our thesis about demand for a whole portfolio view combining Aladdin and eFront capabilities, it's driven new sales for both Aladdin and eFront. In 2021, we made the strategic acquisition of Aperio to expand whole portfolio capabilities to accelerate growth in direct indexing. Aperio AUM is now 3x higher at approximately $100 billion, with the business logging 23% organic growth. We'll look to repeat this success with Preqin and have a business plan that we believe can generate significant synergies, resulting in an 18% IRR. We look forward to building our data capabilities and building the standard for private markets' whole portfolio of the future, from investment to technology to data. Let's go ahead and open it up for questions.
At this time, I'd like to remind everyone, in order to ask a question, please press star, then the number one on your telephone keypad. If you do ask a question, please take your phone off its speaker setting and use your handset to avoid any potential feedback. Please limit yourself to one question. If you have a follow-up, please re-enter the queue. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Bill Katz with TD Cowen.
Okay. Thank you very much for taking the question.
Good morning.
Good morning. Congrats on the transaction. Very interesting. So excuse me, Preqin itself has been growing at a pretty good CAGR for the last couple of years, as you highlighted, 20% +. Just wondering if you could expand a little bit more around where you see the best opportunity to drive that growth, and then what are the underlying assumptions that get you to that 18% IRR. Thank you.
Martin?
Great. Thanks, Larry. I'll start. Bill, thank you for the question. Just like with previous acquisitions, Preqin is about growth. We see a very strong opportunity to unlock great value in private markets data through new capital markets products, new use cases, and importantly, this combination of Preqin with the BlackRock engines in Aladdin indexing and capital markets being a core part of that unlock. BlackRock's technology business today focuses on enterprise investment services through our Aladdin and eFront platforms, eFront being that specialized workflow for private markets investing. We're going to go back to this concept of a common language for private markets through the combination of the Aladdin and eFront workflows and the industry-leading, most comprehensive data that Preqin provides.
That connectivity, that network effect of enabling and connecting investors, fund managers, and service providers through that common platform with uniform workflows, we think is going to be incredibly powerful. We actually believe it's going to be incredibly powerful for our Aladdin clients. It'll be good for fund managers, for investors. It'll connect them, and it'll help grow the private markets. Additionally, with our investment tools and this data, we believe that we can index the private markets. And that could be a transformational opportunity. The indexing companies have brought order and transparency to the public markets over a multi-decade period and obviously created huge value in doing that. Indices have become the language of the public markets, and we believe we could do the same by bringing the principles of indexing, even iShares, to the private markets.
We expect that indices and data are going to be very important future drivers of the democratization of alternatives. This acquisition is the key unlock for BlackRock.
Your next question comes from Alex Blostein with Goldman Sachs.
Good morning, Alex.
Hey, Larry. Good morning. Thanks for the question, everybody. Just maybe to build on some of the revenue synergy opportunities you highlighted, I was hoping you can talk a little bit about how, in addition to sort of enhancing the tech and data offering at BlackRock, this acquisition could also change the way you're thinking about BlackRock's asset management capabilities when it comes to private markets, whether it's launch of secondaries or more co-invest opportunities. Just kind of thinking about what other symbiotic ways this deal could enhance the firm as a whole, not just on the tech side, but also on the asset management side.
Martin?
Larry, I'll take it. It's Rob Goldstein. I'll take the question. And it's something that we've given a lot of thought to, and we believe there's significant opportunity. It's interesting because, particularly within BlackRock, data is the underlying fuel for how we innovate in terms of investment products. And we believe that the access to this data will enable BlackRock, but also importantly, other market participants to create new products that are much more analytical, systematic, and data-driven. And we think traditionally the private markets have been slowly migrating towards leveraging data and analytics to build portfolios. And we think this will help catalyze that quite significantly, with BlackRock leading the charge.
We'll go next to you, Michael Cyprys with Morgan Stanley.
Hi. Good morning. Congratulations on the deal. Hey. Just wanted to dig in a little bit on the historical 20% revenue growth. I was hoping maybe you could help unpack how much pricing has contributed to that. What sort of growth and net retention rates do you see? And as you look out, maybe you could just talk a little bit about the building blocks to sustaining or even accelerating that revenue growth as you look out from here. And just quickly on the margin profile, I think you commented that it's margin-dilutive to BlackRock, but just any color or perspective on how that margin profile compares to BlackRock overall, just in terms of order of magnitude, how much lower that is. Thank you.
Hi. This is Sudhir Nair. I'll take the first half of the question, and I'll hand it over to Martin for the second. I mean, in terms of historical growth, like many data businesses, pricing has contributed a component of their historical growth. But much of, as they've expanded their business, has come through product expansion and winning new clients. So if you look at their business, their revenue stream is license-based, very sticky, and every year they've been successful, significantly expanding into the white space and overarching TAM, adding several hundred new logos to their business. So it's a combination of pricing, but also just sales motions and expanding their reach to new client logos.
Just on the back end of the question, so as you said, the revenue's grown at about 20% CAGR over the last three years and has shown, obviously, positive in scaling margins. For BlackRock, it's going to add approximately $240 million in highly recurring revenue. And again, we see that as very valuable, as less sensitive to capital markets fluctuations, and puts a lift of about 15% on ACV as we sit here today. So we see the opportunity really to accelerate revenue growth as we integrate more of the Preqin data with workflows, making the products, I think, more attractive to a wider array of clients. We think we can bring many new products to market based on this data, which I think you heard from Larry and Rob. We've got a really strong track record of accelerating revenue growth by bringing firms into BlackRock.
Obviously, we have the eFront case study there. I think importantly, we have an opportunity to drive operating leverage here also in bringing together the best of practices from Preqin and BlackRock in our data factories, the use of automation, AI. We really think that we can drive much more profitable growth. I think the key here going forward is creating the revenue synergies, driving more sales, launching new products. Obviously, we have a good track record of being able to drive operating leverage and generate profitable growth. Doing all those things, we get ourselves to an 18% IRR. As you mentioned, we disclosed it's modestly dilutive to EPS and margin in the early year here, but we see the ability to drive and hit our return over a number of years.
Your next question comes from Aidan Hall with KBW.
Good morning.
Great. Thanks. Good morning. Thanks for taking my question. So a large portion of Preqin's customer base is probably a competitor of BlackRock's in some form or fashion within the private markets. So how do you get Preqin's clients, specifically the GPs, which represent 20% of Preqin's revenues, comfortable with the platform being brought into the broader BlackRock ecosystem?
Great. Thank you for the question. It's Rob Goldstein, and I'll take it. And I think that importantly, as a starting point, recognize that the Aladdin business in aggregate, the fastest growing part of the Aladdin business is actually other asset managers. So this is something that we're quite accustomed to in terms of being a platform as a service and our broader technology business. With regard to Preqin in particular, we're very confident that clients will be the biggest beneficiary from the transaction. It increases our Aladdin client reach fivefold. And if clients choose to, they'll have the opportunity to seamlessly manage public and private portfolios together across both workflow and data on a single unified platform. We're still going to offer Preqin as a standalone service. The Preqin clients do not need to access the software through Aladdin.
But I think a few contextual points that are worth sort of referencing. We are a client of many of the GPs through our multi-asset business, and we have very good relationships, just more broadly, through the Aladdin network. And I think it's also important to remember back to when we acquired eFront five years ago, it was a very similar circumstance. And what we did was mobilized outreach to the GPs, made sure to introduce BlackRock, our goals, made sure they understood the information protection barriers that we have in place. And we have been doing this really since the beginning of being a technology provider. And we will continue to safeguard Preqin's GP and LP data from use by any other parts within BlackRock on the investment side. The addition of Preqin does not change our data commitments or how we use eFront client data.
As with all client information, data continues to be protected by the robust controls and secure environments that we have. So given the experience we have with Aladdin, given the experience we have with eFront, we're actually quite confident in the ability to actually grow the GP community.
Your next question comes from Glenn Schorr with Evercore.
Hello.
Hi, Glenn.
Thanks. Hello. So I want to dig a little bit more into your vision of passive investing or indexing in private markets. Just A, how far off are we? Are you familiar with maybe the NewVest model that invests in the same vintages of each year? And then most importantly, I think on people's minds is, what's the same or different than what indexing brought to public markets? In other words, people are thinking outflows and lower fees, but that doesn't necessarily have to be the same thing in private markets. Thanks so much.
Thanks, Glenn. It's Martin. I think one of the most exciting parts of this transaction is the opportunity to bring all of the precision, rigor, risk analytics, market measurement frameworks that indexing has brought to the public markets to bring all of that to the private markets. And you have to think about just, I think, this ecosystem that's been built where risk models, indexes, they've become the language of public markets. They've built the entire ETF market. And we see all of those same opportunities in the private markets. Standardized risk models, standardized benchmarks, the language of asset allocation, the measurement of performance. We see those things as being good for investors in how they build outcome-oriented portfolios. We also think that they'll be great for the alternative asset management industry in being able to bring more discipline, order, and standardization in how clients allocate capital.
But we also think that in the long range, investable indices can be very interesting. And we have a great platform, obviously, in iShares to be able to take some of this data, use it, and create, obviously, investable indices through the public markets through things like exchange-traded products. But most importantly, creating this ecosystem where you put together the data, the technology, and the workflows, we think that's the biggest unlock for how clients build portfolios and how we grow significant capital in the space.
Your next question comes from Brennan Hawken with UBS.
Good morning. Thanks for taking my question. Would love to follow up on Bill's question in understanding specifically the presumed growth rate hit the 18% IRR. Totally appreciate this is an incredibly unique asset and very well positioned, but just understanding a little more specifics about the financial impact would be great. And maybe whether or not there's impact to buyback and whatnot would be helpful. Thanks so much.
Martin?
Sure. Just on taking the second part first, on the announcement today, we plan, Brennan, to continue with our previously communicated quarterly pace of dividend and repurchases subject to markets and other conditions. Again, going back to the strategy, our capital management strategy is always first to invest in the business, which includes inorganic investments, and then to return excess cash to shareholders through a combination of dividends and share repurchases. Our share repurchases are an output rather than an input to capital management. So first, we'll satisfy our commitment to the dividend before returning capital through repurchases. But as I said, we plan to continue with our previously communicated quarterly pace of dividend and repurchases subject to market and other conditions. I think, Brennan, that what you've heard here is a story that's about growth, a business plan that's about growth.
It's about driving more sales by building out a more comprehensive fund and deal-level database. It's about using our partnership and distribution channels, integrating data and workflow into a unified platform that better serves clients. It's about investing in growing new products, risk models, benchmarks, investable indices. And it's also about creating operating leverage and fixed-cost scale, which we're confident we can do. Doing those things are the revenue synergies that are the contribution to an 18% IRR. It's how we value the transaction. It's how we approach the internal rate to what we do. And we're excited about our ability to get there.
Ladies and gentlemen, we have reached the allotted time for questions. Mr. Fink, do you have any closing remarks?
Thank you, Operator. I want to thank all of you for joining us this morning on such short notice. BlackRock is what it is today because we've taken a long-term view on what market forces will drive outsized growth for our clients and for BlackRock. We believe we're doing this again today, guided as always by the need of our clients. We're confident our shareholders will be among the biggest beneficiaries. We're excited about the opportunities ahead. We look forward to speaking with many of you later this month on our second quarter earnings calls. Everyone, have a good summer. Thank you.
This concludes today's teleconference. You may now disconnect.