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The co-founder of personal capital funding agency Blue Owl is in search of to engineer a multiway merger to create a diversified different funding big within the mould of Blackstone and KKR that he might in the end take public.
Michael Rees, whose agency pioneered a method of shopping for small minority stakes in fast-growing non-public capital teams, has been sounding out potential companions for a deal that will mix specialists from completely different fields to create an business heavyweight, in line with 4 individuals conversant in the matter.
The billionaire dealmaker has pitched a tie-up of between three and 5 corporations inside Blue Owl’s portfolio that will span non-public fairness buyouts, infrastructure offers, credit-based investments and different sectors similar to actual property.
Blue Owl, which was shaped by way of the merger of Rees’s Dyal Capital with credit score investor Owl Rock Capital and a public Spac through the increase in 2021, holds stakes in non-public infrastructure teams together with Stonepeak and I Squared Capital and people with massive infrastructure-like portfolios similar to Bridgepoint.
It additionally holds minority pursuits in Vista Fairness Companions, Silver Lake, HIG Capital, Platinum Fairness, Cerberus and Clearlake Capital, amongst dozens of holdings. Blue Owl wouldn’t be a part of any merger.
“I might be very shocked if we’d not have this [tie-up] come to fruition within the subsequent 24 months,” mentioned one non-public capital government conversant in Blue Owl.
Blue Owl and Rees declined to remark.
Though Rees’s proposal is known to be at an early stage, his plan nonetheless underscores the shift happening within the different funding market, which is quickly consolidating.
The business’s high dealmakers are being pressured to decide on whether or not to remain non-public and specialize in just a few principal strengths, or develop into a part of greater, publicly listed monetary teams.
A wave of merger exercise that culminated with BlackRock’s $12bn buy final week of credit score supervisor HPS — a Blue Owl portfolio firm — has pushed many corporations to revisit the technique.
Some executives now worry that the business’s energy will more and more be pushed by a handful of diversified gamers which have scope to draw new cash from buyers starting from massive sovereign wealth funds to rich particular person buyers and ultimately retirement savers.
In October, Michael Brandmeyer, an government at Goldman Sachs, warned that many impartial non-public fairness teams have been underestimating the affect of the torrent of money flowing to bigger gamers, in addition to challenges from succession processes.
“There’s a variety of disruption taking place within the [private equity] business, nevertheless it’s not likely obvious from the floor . . . I wish to say that there are a variety of non-public fairness corporations proper now which are investing their final funds. They simply don’t understand it but,” Brandmeyer mentioned, dubbing such teams as “zombie corporations”.
Nevertheless, advisers mentioned that deal talks — whether or not between friends or with a bigger asset supervisor similar to BlackRock — nonetheless not often culminated in transactions due to fears over clashing methods and personalities.
“It’s a individuals enterprise,” one non-public capital government near Blue Owl mentioned. The tie-up floated by Rees could be “a merger of equals, [with] completely different valuations in several sectors with some overlap . . . It’s not a straightforward factor. It’s in precept a good suggestion.”
