Ten years ago today, BlackRock took a giant step toward becoming the world's largest money manager, announcing it would acquire Barclays Global Investors.
In a deal that rocked the global investment industry in the early aftermath of the great financial crisis, New York-based BlackRock agreed to pay $13.5 billion to acquire the investment management business of London-based Barclays.
When the deal closed on Dec. 1, 2009, BlackRock more than doubled its worldwide assets under management to about $3.29 trillion from $1.44 trillion and became the world's largest money manager, a status it has retained.
Worldwide assets under management have since increased 98.2% to $6.52 trillion from Dec. 1, 2009 to March 31.
BlackRock struck the deal with Barclays to broaden the firm's investment capability with passive and quantitative investment strategies, particularly exchange-traded funds, Chairman and CEO Laurence D. Fink said in an interview.
The BGI acquisition gave BlackRock "a unique platform that no other firm had ever had because at that time there was a belief that the cultures of active and passive managers were so diametrically different that you could never have a firm have both. And my answer to that nonsense was 'Why not? Our clients use both,'" Mr. Fink said.
The BlackRock-BGI deal was "a game changer because it showed the industry what real scale can achieve with the successful merging of active and passive management under one roof. It also demonstrated why scale is becoming essential for asset management firms' survival in a turbulent environment," said Daniel Sondhelm, CEO of Sondhelm Partners, Alexandria, Va., a firm that advises money managers on marketing and distribution strategies, in an email.
Mr. Fink said the "foundational context" of BlackRock's acquisition of BGI was to address client demand for outcome-oriented portfolio strategies.
"Clients were looking for complete solutions. BlackRock was able to offer active products and risk technology with our Aladdin systems," Mr. Fink said, but noted that the firm also needed to be able to offer institutional and other investors a full spectrum of investment strategies, including passive and quantitative approaches.
Mr. Fink said BlackRock already had a "very strong" relationship with BGI prior to deal negotiations in 2009. In fact, he said that after "very in-depth conversations" with Barclays in 2004 about acquiring BGI, BlackRock "walked away" from the deal.
At that time, BGI would have been BlackRock's first acquisition since its founding in 1988 and Mr. Fink said he "wasn't quite confident enough" to go through with the deal, noting "I didn't think BlackRock had the DNA to make an acquisition" at the time.
However, after the acquisitions of State Street Research & Management in 2005 and Merrill Lynch Investment Managers in 2006, Mr. Fink said the successful integration of those firms gave him and the executive committee the confidence to go through with the BGI deal.