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Keeping Talent through M&A

Earlier this month, BlackRock made a splashy deal to buy GIP for $12.5bn. The bulk of the $12.5bn that BlackRock is paying  will go to the latter’s six founders. Additionally, carried interest for existing vehicles will stay with GIP as well as 40 per cent of performance fees of future funds. 

Acquirers of human capital-oriented firms generally create enticing incentive programmes to attempt to retain talent. But cultural change and the potential for lower upside can drive executives away. The history of combinations in financial services is littered with examples where the prized assets quickly walked out the door.

But it is not just about the money. Individuals choose where they work; some aspire to Global Managers that allow for matrixed relationship management, team collaboration and a Waterfront of Product. Others seek a specialist boutique set up where the focus is more on the investment and the client working with smaller groups of people and so a tighter culture. 

Acquirers walk a tightrope of retention for key talent whilst accepting that ultimately if someone wants to go they go. 

Private equity firms are skilled at buying companies, whipping them into shape and selling them on at a handsome profit. Managing the frictions among well-remunerated fund managers in their own dealmaking is a different game entirely. Earlier this month, BlackRock made a splashy deal to buy Global Infrastructure Partners for $12.5bn.  BlackRock isn’t a traditional private equity firm but it is certainly ambitious in its private capital aspirations. Its target is just one of a number of successful independent managers eyed by large money management complexes. More deals are expected as pensions and sovereign wealth funds increasingly favour one-stop shops. But for publicly traded capital managers considering such acquisitions, the tensions between fund investors, public shareholders and employees creates a high-wire act.


asset & wealth management

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