The asset management industry is in the middle of a radical period of transformation, with unprecedented levels of consolidation, according to law firm Ropes & Gray.

The law firm said in a report that private equity sponsors executing consolidation transactions reached a record $9bn in 2023, a 38% year-over-year increase, citing data provider PitchBook.

“An improved dealmaking environment in 2024 paired with heightening competition in the asset management space could bolster near-term dealmaking activity,” added the report.

Ropes & Gray highlighted two “industry- defining” acquisitions at the start of this year. In January 2024 BlackRock announced its $12.5bn acquisition of Global Infrastructure Partners (GIP), an infrastructure manager with more than $100bn of assets under management. A few days later, General Atlantic acquired UK-based infrastructure manager Actis, adding $12.5bn to the US private equity group’s $83bn of assets under management.

BlackRock’s acquisition of GIP allowed the asset manager to ramp up its position as a key player in the alternative assets space and added private markets capabilities to its strong base in traditional asset management, according to Ropes & Gray. The transaction also enabled expansion into infrastructure, an industry many managers are looking to enter given increased demand.

“Fund investors have increasingly sought to consolidate their GP relationships, writing larger checks to bigger managers that offer multiple alternatives strategies across their platforms,” added Ropes & Gray. “Acquisitions can help a manager build scale, accelerate AUM growth, expand geographic footprints and grow the number of investment strategies and teams on their platforms.”

When BlackRock’s acquisition was announced Bayo Ogunlesi, founding partner, chairman and chief executive of GIP, said: “We are about to enter the golden age of infrastructure, and the question for GIP was how we accelerate what we have done.”

Larry Fink, chairman and chief executive of BlackRock, also said at that time  that the combination with GIP will make the firm the second largest private markets infrastructure manager with over $150bn in total assets under management.

“This is another truly transformational moment for BlackRock and the largest since we acquired BGI nearly 15 years ago,” Fink added.

Going public

In addition to an increase in M&A activity, there has also been an increase in the number of private managers going public, according to Ropes & Gray.

“For large private markets franchises that have already built out multi-strategy platforms and large pools of assets under management, a public listing is an attractive option for securing liquidity to facilitate succession, raising capital towards new business lines or funding GP commitments,” added the report.

For example, global investment firm CVC Capital Partners listed on Euronext Amsterdam in April this year. The company has approximately €186bn in assets under management across seven complementary investment strategies in private equity, secondaries, credit and infrastructure according to a statement from Rob Lucas, chief executive of CVC

Lucas said in a statement: “This fundraising success underpins our continued growth, and with approximately €69bn of AUM across secondaries, credit, and Infrastructure, we have an ever more scaled, diversified, and differentiated platform. We believe an IPO of CVC provides an enduring long term institutional structure to support further growth, we remain completely focussed on the continued success of CVC, and neither I nor any of my active partners are selling shares as part of this transaction.”

Ropes & Gray noted that Blackstone became the first major alternative assets manager to be admitted to the S&P 500 in September last year, and that analysts believe Apollo and KKR are also contenders to join the index.

The law firm continued that the opportunity to go public remains limited to large, diversified private markets sponsors.

“More recently, managers planning an IPO have restructured their businesses ahead of the public offering to bifurcate economics between the publicly traded vehicle and vehicles held by management and other historic investors in the firm,” added Ropes & Gray. “This allows the carried interest income to be allocated to the non-public owners, while the public investors benefit from a stable base of management fee income.”

For example, in June this year Pershing Square Capital Management sold a $1.05 bn stake to a consortium of strategic investors. Bill Ackman, founder and chief executive of Pershing Square, said in a statement: “We are delighted to invite a group of world-class, long-term partners as investors in our business, which has been entirely owned by Pershing Square employees since our inception more than 20 years ago.”

Middle-market managers running single strategies or those with smaller assets under management are also increasingly taking on third-party capital through minority investments, including seeding arrangements, GP stakes deals, revenue share arrangements, or other structured finance solutions, and the appetite for these deals is expected to continue to rise, according to Ropes & Gray.

“As the private capital industry makes its way through a challenging period for fundraising and deploying capital, managers of all sizes and strategies will likely be considering how to grow their businesses in the next stage of the firm’s evolution,” said the law firm.