BlackRock (BLK) to Buy Aperio From Golden Gate for $1.05B

In an effort to expand its presence in the separately managed accounts (“SMAs”) market, BlackRock BLK has agreed to acquire investment management services provider, Aperio Group LLC, from Golden Gate Capital and Aperio employees for $1.05 billion in cash. The deal, anticipated to be completed in first-quarter 2021, will likely be minimally dilutive to earnings per share (“EPS) although it is not expected to be dilutive on a cash basis.

Aperio is a pioneer in customizing tax-optimized index equity SMAs that reflect the uniqueness of each of its clients’ risk, tax, and personal value preferences. Its high-touch consultative client services focus on the ultra-high net worth households, and institutions that are served by private banks and independent registered investment advisors (“RIAs”).

BlackRock has been planning to operate Aperio as a separately branded, vertically integrated team within its U.S. Wealth Advisory business.

Notably, it is expected that after the acquisition of Aperio, BlackRock’s SMA assets will increase by nearly 30% to more than $160 billion.

Aperio will likely retain its investment, business development, client service, and ESG-SRI processes under the leadership of its co-heads Ran Leshem and Liz Michaels. Also, Aperio’s current CEO, Patrick Geddes, is expected to maintain his role as Aperio’s chief tax strategist. Geddes will become a senior advisor at BlackRock.

Martin Small, the head of BlackRock’s U.S. Wealth Advisory business, stated, “The wealth manager’s portfolio of the future will be powered by the twin engines of better after-tax performance and hyper-personalization. The combination will bring institutional quality, personalized portfolios to ultra-high net worth advisors and will create one of the most compelling client opportunities in the investment management industry today.”

Michaels and Leshem said, “Aperio has been honored to earn the trust of the most demanding wealth managers by always putting investors’ interests first and partnering with advisors to solve the complexities of UHNW investors through research integrity and excellence in human-centric client experience. With BlackRock, we have found a like-minded fiduciary firm with long-standing roots in tax-efficient indexing, a commitment to sustainable investing, and Diversity, Equity & Inclusion, and a track record of delivering consultative whole portfolio solutions to wealth management intermediaries.”

Our Take

Supported by a solid liquidity position, BlackRock has continuously been engaging in inorganic growth efforts for the past several years. Its broad product diversification, revenue mix and steadily improving assets under management (“AUM”) balance are expected to keep aiding growth in the quarters ahead. The company’s constant efforts to strengthen the iShares and exchange traded fund (“ETF”) operations along with its increased focus on active equity business remain impressive.

Shares of the company have gained 33% over the past six months, outperforming 24.8% growth recorded by the industry.

Currently, BlackRock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Amid the pandemic-induced slowdown, consolidation within the U.S. finance sector has been on the rise as various investment managers, brokers and banks have engaged in opportunistic buyouts. Recently, Eaton Vance Corp. EV, through its wholly-owned subsidiary, Eaton Vance Investment Counsel, completed the acquisition of the assets of the Winter Park, FL-based wealth management firm — WaterOak Advisors, LLC.

In August, Franklin Resources BEN, operating as Franklin Templeton, completed the buyout of Legg Mason, Inc. and its specialist investment managers for $4.5 billion.

In October, Charles Schwab SCHW concluded the acquisition of TD Ameritrade Holding for roughly $22 billion, which created a behemoth in the online brokerage space.

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