BlackRock has inked a definitive agreement to buy Aperio from private equity firm Golden Gate Capital and Aperio employees in an all-cash deal worth $1.05 billion.
Aperio is a provider of personalized index equity solutions and customizes tax-optimized index equity separately managed accounts (SMAs) to help wealth managers identify each client’s risk, tax, and personal values preferences. BlackRock (BLK) expects the tie-up with Aperio, which has $36 billion of assets under management, to boost its SMAs by about 30% to over $160 billion.
The acquisition of Aperio, which will be funded from current corporate liquidity, is anticipated to close in the first quarter of 2021, the world’s largest asset manager said. Although minimally dilutive to earnings per share, the transaction is not expected to be dilutive on a cash basis, the firm added.
“The wealth manager’s portfolio of the future will be powered by the twin engines of better after-tax performance and hyper-personalization. BlackRock and Aperio, working together, will bring unmatched capabilities to meet these objectives,” said Martin Small, head of BlackRock’s US Wealth Advisory business. “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.”
Aperio’s consultative client service model focuses on ultra-high net worth households and institutions served by private banks and the fast-growing independent registered investment advisor (RIA) market. The US retail and wealth SMA market totals approximately $1.7 trillion in assets and is growing at approximately 15% annually and 35% among RIAs.
BlackRock said that it plans to operate Aperio as a separately branded, vertically integrated team and as part of its US wealth advisory business. As of September 30, 2020, the firm managed approximately $7.81 trillion in assets on behalf of investors worldwide.
In an upbeat note, Deutsche Bank analyst Brian Bedell ramped up the stock’s price target to $795 (16% upside potential) from $685 and maintained a Buy rating, citing a “more bullish view” on equity markets and long-term interest rates post the US election.
In addition, more optimism around the development and progress of an effective Covid-19 vaccine in 2021 should also be a driver of investor spending, the analyst argued. (See BLK stock analysis on TipRanks)
In line with Bedell’s outlook, the rest of the Street has a bullish stance on the stock. The Strong Buy analyst consensus shows 7 Buys versus only 1 Hold. With shares up 36% year-to-date, the average price target of $719.14 implies upside potential of another 5.3% to current levels.
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