Fund giants want a piece of the $1.5T private credit action

Investcorp’s Jeremy Ghose is a popular man. Ever since the $50 billion firm snapped up alternative-credit manager Marble Point late last year, he’s been juggling calls from bankers and firms pitching similar deals.

“People know we’re in acquisition mode and they know we have the ability to write checks,” says Ghose, managing partner and chief executive officer of Investcorp Credit Management, the Bahrain-based firm’s lending arm. The $200 million purchase of Marble Point, a specialist in collateralized loan obligations, added $7.8 billion of assets-under-management to his division.

Investcorp isn’t the only show in town for private-credit firms hunting buyers. Deutsche Bank’s asset manager DWS Group and Janus Henderson Group both say they’re looking to buy. In an interview with Bloomberg News, Janus Henderson CEO Ali Dibadj says he’s weighed up about 100 opportunities since taking the top job in June last year, without buying any firms. About half involved alternative assets such as private capital.

While the past 18 months have been pretty miserable for M&A bankers, the recent surge in interest in private-credit deals is a rare bright spot. This once niche market has become a $1.5 trillion behemoth, and the fund-management giants — attracted by bumper fees and the retreat of banks from corporate lending — want in. At the same time smaller credit firms are finding it hard to raise funds lately. Many want to cash out.

“The key thing is what’s driving the M&A,” says Ghose. “It’s consolidation, it’s big asset managers coming into the space and also consolidation among the alternatives firms. It’s been very active.”

William Barrett, managing partner at Reach Capital, a private-market fundraising firm, says there’s a “great alignment between asset managers that are late to the party and private-debt general partners who realize they can make a couple of million through selling their stake.”

Private-debt titans such as Apollo Global, Ares Management and Oaktree Capital may consider high-quality additions, too, according to some industry executives. The firms declined to comment. But most deals so far involve large traditional players: T. Rowe Price bought Oak Hill for $4.2 billion at the end of 2021; late last year Nuveen agreed to acquire control of Arcmont; this summer Man Group Plc agreed to buy Varagon Capital and BlackRock Inc. bought Kreos.

“We’re seeing traditional asset managers drive a large component of M&A demand for private-credit capabilities,” says Damian Hourquebie, a partner at EY who leads its wealth and asset-management transactions practice in Europe. “This is in response to competition from alternative asset classes, in addition to a demand from investors.”

The ballooning size of the market is forcing the established money managers to get involved, alongside the promise of lucrative returns as a way of juicing profits and avoiding investor outflows. Apollo reckons private credit could replace as much as $40 trillion of the debt markets eventually.

DWS, which has €859 billion ($922 billion) under management, is looking to buy smaller firms, according to the head of its alternatives business, Paul Kelly. “Private corporate credit in Europe is our largest area of focus for growth,” he says in an interview. “We’re really digging in here.”

The German fund giant, which hired Kelly from Blackstone Inc. this year to spearhead its drive into this market, is looking at acquisitions in the €400 million to €700 million range, according to a person familiar with the matter.


The trend’s also being driven by investors in private-credit funds demanding scale, quality and a track record when deciding where to put their money. That’s pushing mid-tier firms to merge with larger rivals to avoid failed fundraisings, which in turn leaves smaller funds with a stark choice: Join the M&A party or brave it out as a minnow.

Investors “want the more established players who’ve been around for 20 years and have seen this environment before,” says Hugh MacArthur, chairman of Bain & Co.’s global private equity practice, referring to the challenge of coping with soaring interest rates, high inflation and recession fears.

“If they attach themselves to a bigger institution,” he adds, “it gives these firms a bigger platform and more resources to hire more people in a way that a midsized firm can’t and they’ll be more attractive to investors.”

The numbers tell the story. Data from Preqin show that private-debt funds raised $103 billion in the first half of 2023, down from $113 billion in the same period last year. This year it was spread across only 91 funds. In 2022, it was 127 in that same timeframe.

“If you have 50 sales people trying to fundraise for you versus five, that’s going to make a big difference,” says Reach’s Barrett. “Many firms have the same offerings and strategies, so they can’t differentiate themselves other than having a larger investor relations team to help promote and raise funds, and a larger balance sheet. It gives them the edge.”

Unfortunately for founders who want to sell, there’s also a catch: Join one of the behemoths and you might wave your creation goodbye. According to MacArthur, many large alternative-credit houses are more interested in acquiring a business than taking on extra personnel and would be inclined to keep the books and get rid of everything, and everyone, else.

Some wannabe buyers are even offering promises that they won’t steamroller existing private-credit teams and strategies, as a way to set themselves apart. “They’re coming to us instead of going to some of the other shops because they know we’re not going to come in and impose an investment philosophy on them,” says Dibadj at Janus Henderson, which manages $322 billion.

Questions about founders losing control or not, market participants expect consolidation to accelerate. “There are lots of businesses with $10 billion or so that want to sell,” says MacArthur.

“Some of the smaller guys can see the end coming,” adds Marc Chowrimootoo, managing director at Hayfin Capital, a €31 billion alternatives asset manager. “They know the current situation isn’t sustainable. My perspective is that we’re just at the beginning, we’re starting to see this concentration but we haven’t seen the full scale yet.”

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