NEW YORK (S&P Global Ratings) July 1, 2024--S&P Global Ratings today said that BlackRock Inc.'s (AA-/Stable/A-1+) proposed £2.55 billion (approximately $3.2 billion) acquisition of Preqin, a leading independent provider of private markets data, will add recurring revenue to BlackRock's technology services.
While this transaction will allow Blackrock to scale its private market alternatives and technology capabilities and complement its Aladdin business, we expect it will cause leverage to increase to 1.2x-1.3x in 2024-2025 before declining to 1.0x-1.2x in 2026. This is above our base-case expectation of 0.5x-0.9x.
The acquisition is expected to close before year-end 2024, subject to regulatory approvals and other customary closing conditions. Preqin founder Mark O'Hare will join BlackRock as a vice chair after the close of the transaction.
BlackRock is paying an acquisition multiple of about 13x based on an expected $240 million in annual recurring revenue for 2024. However, on an EBITDA basis, we believe it is paying an even higher multiple, because we expect Preqin to add a minimal amount to BlackRock's EBITDA through 2026.
At closing, BlackRock will pay the total purchase price of about $3.2 billion in cash and plans to issue new unsecured debt of $3.0 billion to fund it. While the proposed transaction does not affect our 'AA-' issuer credit rating or stable outlook on BlackRock Inc., we see little room for additional debt-financed acquisitions at the current rating level until BlackRock integrates its two recent acquisitions (Preqin and Global Infrastructure Partners) and leverage starts to come down closer to 1.0x.
The stable outlook on our rating on BlackRock reflects our expectation that over the next 18-24 months BlackRock will maintain its leading market position and favorable reputation among global investors, thereby generating strong cash flow from operations to service its outstanding debt. We anticipate that BlackRock's EBITDA margin will remain above average; leverage, on an adjusted debt to EBITDA basis, will be 0.5x-0.9x in the longer term; and interest coverage will remain above 15x.
We could lower the ratings over the next 18-24 months if adjusted debt to EBITDA surpasses 1.5x--owing to an increase in debt or a decrease in EBITDA or surplus cash. We could also lower the ratings if any regulatory developments meaningfully weaken BlackRock's business model or strain profitability.
This report does not constitute a rating action.
| Primary Credit Analyst: | Gaurav A Parikh, CFA, New York + 1 (212) 438 1131; gaurav.parikh@spglobal.com |
| Secondary Contact: | Elizabeth A Campbell, New York + 1 (212) 438 2415; elizabeth.campbell@spglobal.com |
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