Blackrock $12B Deal, RegTech Boom, AI’s Financial Takeover

Happy hump day !

This week we explore the Regtech Boom! From $12.6B to $104.17B in just over a decade, RegTech is reshaping how businesses tackle compliance in a hyper-regulated world.

GP stakes investing has quietly transformed from a niche play to a game-changer, offering private equity a lifeline of liquidity and investors a steady stream of growth-driven returns.

AI is rewriting the rules of finance, and private equity is fueling the revolution, $35B in 2023 is just the beginning of a $97B opportunity by 2027.

Fifteen years ago this week, the U.S. economy entered a tailspin that reshaped the financial world forever, welcome to the Great Recession.

Here’s to navigating another week of disruption and opportunity!

— Team PE 150

In this Issue:

• Data Dive

• Trend of the Week

• Liquidity Corner

• Deal of the Week

• Macroeconomics Corner

• This Week In History

• Interesting Articles

• Tweet of the Week

📚 Data Dive

The RegTech Boom: a $100B Deal

The RegTech market is on fire, projected to skyrocket from $12.6 billion in 2023 to $104.17 billion by 2034—an impressive 21.3% CAGR. Why? Skyrocketing compliance costs and regulatory complexity are forcing companies to adopt tech-driven solutions. In sectors like finance, ESG, and cybersecurity, navigating ever-changing rules such as GDPR (Europe) and CCPA (California) is no longer optional. RegTech delivers real-time tracking, automated reporting, and AI-powered tools that boost accuracy while cutting costs.

Private equity should especially focus on high-potential geographic targets like Europe, the birthplace of many regulations and RegTech pioneers. The UK leads in dealmaking, with 23% of Europe’s activity in H1 2024. Beyond that, Singapore and the UAE shine as prime regions for adoption, thanks to their combination of stringent regulatory environments and robust digital infrastructure. With the industry's youth and fragmentation, the opportunity for consolidation and creating niche leaders is massive—a recipe for both operational impact and alpha returns​.

Want to learn more?

📈 Trend of the week

Financial Sector Goes All-In on AI

Private equity might be looking at its next gold rush: AI in the financial sector. Spending is projected to jump from $35B in 2023 to $97B by 2027—a sizzling 29% CAGR. The banking industry is leading the charge, already investing $20.6B this year, while retail isn’t far behind at $19.7B.

The kicker? Private capital is powering much of this momentum, suggesting the runway for value creation (and eventual exits) is substantial. Yet, competition is steep, and the winners will likely be those who crack the code on scalable applications in risk management, fraud detection, and personalized customer experiences.

The question for PE sponsors: Which portfolio companies are ready to capture this transformation—or risk being left behind?

💰Liquidity Corner

GP Stakes Deals: Fueling Growth and Cash Flow for PE Firms

GP stakes investing, once a niche strategy in the alternative asset space, has grown into a sophisticated and dynamic tool for generating returns in private equity (PE). This strategy involves purchasing minority equity stakes in PE firms in exchange for a share of their revenue streams, offering investors a blend of steady cash flows and exposure to long-term growth. Notably, GP stakes investments provide PE firms with much-needed liquidity, allowing them to diversify their balance sheets, fund operations, or expand their investment strategies without diluting their control.

From the early days of sovereign wealth funds and public pensions making direct investments to the rise of specialized vehicles like Goldman Sachs’ Petershill funds and Dyal Capital Partners, the GP stakes market has undergone significant milestones. As illustrated in the accompanying chart, deal value in 2023 rebounded modestly to $2.08 billion after a sharp drop from the 2021 peak of $7.36 billion, reflecting the market’s resilience and potential for resurgence. By providing PE firms with liquidity and strategic capital, GP stakes investing enables firms to weather market challenges and seize growth opportunities while offering investors access to stable revenue streams from management fees and carried interest.

🤝 Deal of the Week

BlackRock's $12B Move into Private Credit with HPS Acquisition

BlackRock continues to make bold strides in private markets with its latest acquisition of HPS Investment Partners for $12 billion in an all-stock deal. This marks the asset management giant's third major acquisition in 2024, reinforcing its aggressive push into private credit, an asset class that's expected to skyrocket from $1.5 trillion in 2023 to $2.6 trillion by 2029, according to Preqin. HPS, a private credit powerhouse managing $148 billion in assets, will integrate seamlessly with BlackRock’s existing $85 billion private credit platform, creating a formidable $220 billion franchise. 

With this acquisition, BlackRock positions itself to rival giants like Apollo and Ares in the competitive private credit market, while boosting its private market fee-paying assets by 40%. This move follows a year of aggressive deal-making, including the $12.5 billion acquisition of Global Infrastructure Partners and the upcoming $3.2 billion purchase of Preqin. As private assets demand higher fees than BlackRock's traditional ETF business, this expansion not only strengthens its portfolio but also underscores CEO Larry Fink’s vision of private credit as a primary growth driver. The deal also sparks speculation about Fink’s eventual successor, as BlackRock cements its dominance across public and private markets.

📊 Macroeconomics Corner

Digital Business Productivity Index: M&A’s Compass

Ireland, the U.S., Singapore, and France aren’t just geographical points; they’re targets in the crosshairs of tech-savvy private equity. The Digital Business Productivity Index, blending tech investment vitality with worker output, ranks these countries as the epitome of digital efficiency. For PE sponsors, this means fertile ground for high-return investments: robust infrastructure that nurtures innovation and rising productivity—two ingredients critical for value creation and lucrative exits.

The message? Tech ecosystems with both brains (talent) and brawn (investment) are where tomorrow’s unicorns thrive—and where today’s sponsors should park their capital.

🏆 This Week in History

The Great Recession Begins

Fifteen years ago this week, the U.S. economy officially entered the Great Recession—one of the most severe economic downturns since the Great Depression. Between December 2007 and June 2009, the world watched as housing markets collapsed, unemployment soared to 10%, and over $14 trillion in wealth evaporated. Subprime mortgages played the villain, luring in buyers with high-risk, adjustable-rate loans. When the housing bubble popped, major financial institutions, including Lehman Brothers, crumbled. The fallout was global: Europe faced a sovereign debt crisis, while global trade contracted by 15%. From this chaos emerged the era of "too big to fail" bailouts, regulatory reforms like Dodd-Frank, and a six-year stretch of near-zero interest rates. While recovery ensued, the echoes of this financial earthquake still shape policies today.

📰 Interesting Articles

🐣 Tweet of the week

"Start where you are. Use what you have. Do what you can"

Arthur Ashe