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Consolidation in Private Markets: Important Moments Done Right

Philip Walters  Follow

Consolidation in the alternative asset management industry has been ramping up at a remarkably high level, with speculation that the number of active players could reduce significantly over the next decade. Only recently, BlackRock announced a $12.5bn acquisition of Global Infrastructure Partners, and earlier this year we saw CVC’s acquisition of DIF Capital Partners and Carlyle’s acquisition of Evolution Funding, to name but a few.

Private credit in particular had a watershed year in 2023.

What was once a niche market is maturing into a giant in its own right. Last year, the size of the private credit market was $1.6 trillion[1] and is projected to rise to $3.5 trillion by 2028[2]. Now, a wide variety of firms are focusing their attention on the space, from major private equity houses to traditional asset managers and, somewhat ironically but not unexpectedly, banks themselves.

You need only look at recent spate of consolidation to understand what is happening.  Deals in the space allow private credit leaders to maintain the specificity, rigor and resilience of their investment philosophies, while benefitting from scaled distribution footprints and larger, more global, capital bases. Having endured a period of pressures like slow growth, vastly reduced private equity deal volumes, historically high inflation and interest rate rises, large managers are acquiring private credit firms so that both can keep delivering for clients – not least through capitalizing on the wealth of exceptional talent boasted by private credit leaders.

The market is a complex and crowded one, and most attractive acquisitions are mutually beneficially, offering clients this diversification with a prestigious, experienced manager, rather than having to build from scratch in an asset class with significant barriers to entry.

The time is ripe for private credit firms to be acquired, and deal activity is high. 

Take two recent examples. In March of last year, Nuveen, the investment manager of TIAA, completed its acquisition of Arcmont, a leading European private debt manager. By combining Arcmont with its existing US private credit manager Churchill, Nuveen created Nuveen Private Capital, one of the largest global private debt platforms with $89 billion in assets. The deal is a great example of how consolidation in the space leads to increased distribution, access to new markets and a widening of investment capabilities.

In another recent major deal, this time in the world of alternative credit, Manulife Investment Management acquired manager CQS, in a move to expand its credit capabilities, following the success of CQS’s evolution from a hedge fund manager to a diverse multi-strategy alternative credit manager. The deal scales CQS’s global distribution footprint and enables CQS to benefit from Manulife’s strong capital base. At the same time, Manulife deepens its European presence and benefits from the leadership of one of the most experienced and respected leaders in alternative credit, Soraya Chabarek, CQS’s CEO.

Private credit firms are accustomed to getting deals done – and talking to the media as a part of that. But they are unused to communicating their own corporate stories when under the scrutiny that comes with such an acquisition. Doing so brings with it several major communications challenges.

These acquisitions are a huge milestone for both parties, bringing with them compelling new offerings for their existing clients and reaching new ones. But, it’s easy for the news to get lost or be positioned as part of a trend, so it’s key to take control of the narrative, demonstrate the why of the transaction and how it is right for you and your clients. Here are the five rules to getting this most important of moments right. 

1. Demonstrate the strength of the brand

Ahead of a possible acquisition, the most crucial element is to showcase your firm’s key differentiators and brand strength. Your overarching story, leadership experience, investment philosophy, and organizational purpose and values are all important parts of distinguishing your firm from the competition and showing your value. The brand story needs to be clear and concise, it should leave audiences with a defined understanding of your mission and how you stand out from the crowd, whether it’s in relation to the markets in which you operate, distribution channels, or asset classes you focus on.  

2. Anchor all communications in consistent messaging

During the acquisition process, messaging, whether it’s the announcement itself, client communications, talking to your people, or if there’s an element of governmental or regulatory interest, keeping communications consistent across the board is critical. Specific communications will need to be tailored for each audience, but the underlying narrative articulating the vision behind the deal, and why is it the right course of action, must be unwavering. 

3. Leave no stone unturned when preparing for reputational challenges

Telling the positives of a deal story goes without saying, but equally important is preparing for any scrutiny so you can respond quickly, robustly and head off any criticism at the pass. Forewarned is indeed forearmed. In the run-up to and during the acquisition process, having comprehensive risk scenario plans and reactive messaging to address those scenarios will go a long way to ensuring your messaging does not get side-tracked and your focus can be on articulating strategic rationale and value. These risks can range from leaks of what are inevitably sensitive and confidential transactions all the way through to unique, standalone reputational challenges stemming from other areas of the business. 

4. No channel left behind

As more and more people receive their news from digital channels than not, use LinkedIn to find employment and communicate with their employers through in-house social media, an omni-channel approach to communicating during a deal is essential to making sure your narrative does not get lost or obscured by relying solely on traditional channels. This means not only integrating a digital plan into your communications strategy but also having support to deal with in-bound questions, any criticism and, in extreme cases, misleading information spreading online. 

5. Leverage future milestones

From the time of announcement through to integration and beyond, milestones and events must be planned for. Whether it’s announcements regarding leadership changes, a name or brand change, restructuring or a major hiring spree, or entering a new market, the first year after a deal is announced is a period when there will be heightened scrutiny on the combined business. Planning for these milestones must be done within the context of the deal, as media, employees and other stakeholders will view developments through that prism. The most important part of this is to leverage these milestones as opportunities to reiterate the rationale for the combination, and, where appropriate, promote proof points around the success of the merger.

[1] Bloomberg, as at December 2023

[2] BlackRock, October 2023

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