AD Newsletter: February 2024
Letter from AD Leadership
Hi there,
We’re only two months into the new year and the finance world has already seen significant movements and strategic decisions. This year kicked off with a groundbreaking agreement between BlackRock, Inc. (NYSE: BLK) and Global Infrastructure Partners (GIP). BlackRock's acquisition of GIP, valued at $3 billion in cash and approximately 12 million shares of BlackRock common stock, highlights the growing importance of infrastructure investments in the private markets.
In this edition of the AD Newsletter, we delve into the details of this acquisition, exploring its implications for both companies and the broader finance industry. Our Investor Spotlight features Adebayo "Bayo" Ogunlesi, the Chairman and Managing Partner of GIP, shedding light on his impactful journey and the significant role he'll play in BlackRock's future infrastructure endeavors.
Additionally, AD Alumni Fellow Dhanvi Patel breaks down the concepts of Unlevered Free Cash Flow (UFCF) and Levered Free Cash Flow (LFCF) in our Definition of the Month. Understanding these metrics is crucial for anyone looking to assess a business's financial health and make informed investment decisions.
As we navigate the dynamic landscape of finance, we invite you to explore the stories, insights, and recommendations shared by our community members. From valuable reads and podcasts to influential figures shaping the industry, our curated recommendations provide a well-rounded perspective on the latest in finance.
Dive into the newsletter, expand your financial knowledge, and stay informed about the trends and developments shaping the finance world.
Warm regards,
Jasmine Anklesaria ✨📈
Getting Up To Speed: BlackRock Agrees to Acquire Global Infrastructure Partners (“GIP”)
In January, BlackRock, Inc. (NYSE: BLK) and Global Infrastructure Partners (GIP) entered into an agreement for BlackRock to acquire GIP for a total consideration of $3 billion in cash and approximately 12 million shares of BlackRock common stock.
With the infrastructure market projected to be one of the fastest-growing segments in private markets, the acquisition aims to capitalize on long-term trends such as increased demand for digital infrastructure, logistical hubs, and a global movement toward decarbonization. The combination of GIP with BlackRock's infrastructure offerings creates a global franchise with enhanced origination and asset management capabilities. The $150 billion combined business seeks to deliver market-leading expertise across equity, debt, and solutions, benefiting clients with broader origination and business improvement capabilities.
GIP's management team, led by Bayo Ogunlesi, will oversee the combined platform, fostering opportunities for diversified sourcing and co-investment. The transaction, subject to regulatory approvals, is expected to close in the third quarter of 2024.
Investor Spotlight:
Adebayo "Bayo" Ogunlesi
Written by AD Alumni Fellow Oluwadamilola "Damie" Ajibola
Bayo Ogunlesi is a Nigerian Lawyer and Investment Banker who is a standout in the finance world. He has recently made headlines for his role as the Chairman and Managing Partner of Global Infrastructure Partners (GIP). This move has put GIP in the spotlight as a leader in infrastructure investment. What makes this achievement even more noteworthy is the recent acquisition of GIP by BlackRock, the world's largest asset manager, for approximately $12.5 billion in cash and stock.
GIP, under Ogunlesi's guidance, has become synonymous with excellence in infrastructure investment, owning and operating energy, transportation, and water and waste companies globally. The acquisition by BlackRock marks a significant push into private-market investments for the asset management giant.
Bayo Ogunlesi's early career at Credit Suisse First Boston and Goldman Sachs showcased his skills in investment banking, setting the stage for his future successes. A defining moment in his career was the pivotal role he played in the acquisition of London Gatwick Airport in 2009, solidifying GIP's position as a major player in infrastructure investments.
The influence of Ogunlesi extends beyond borders, with involvement in major infrastructure projects worldwide. From energy ventures in India to transportation initiatives in the United States, Ogunlesi's commitment to projects with far-reaching socio-economic implications reflects a global perspective.
Ogunlesi, along with five of the six founding partners, is joining BlackRock, and he will sit on BlackRock's board. He will also lead BlackRock's new infrastructure group. This move highlights BlackRock's recognition of the exciting long-term investment opportunities in infrastructure, especially as global economic shifts create new incentives for infrastructure technologies and projects.
The deal is expected to close in the coming quarters, after which BlackRock plans to create a distinct Global Infrastructure Partners business. This new business, combining the acquired firm with existing BlackRock infrastructure teams, will become the second-largest private infrastructure manager globally, with assets under management exceeding $150 billion.
Bayo Ogunlesi's journey from investment banking to shaping the future of global infrastructure is a testament to his blend of talent and hard work. As he takes on a pivotal role in BlackRock's new infrastructure endeavors, Ogunlesi continues to be a luminary whose story inspires and whose achievements resonate across the financial landscape.
Definition of the Month: Unlevered Free Cash Flow vs. Levered Free Cash Flow
Written by AD Alumni Fellow Dhanvi Patel
Unlevered Free Cash Flow
UFCF is the cash flow of a business before taking into account financial costs like interest payments. It's the money the business makes from selling lemonade without considering any debt it might have.
Example: Let's say your lemonade stand makes $100 in a month. To make this money, you spend $40 on lemons and sugar, and another $10 on cups and napkins. So, your expenses are $50. Your UFCF is the money left after paying these expenses, which in this case is $100 - $50 = $50. This $50 is your UFCF because it doesn't consider any loans or debts you might have for the lemonade stand.
Levered Free Cash Flow
LFCF is the cash flow that is available after accounting for debt repayments, including interest. It's the money you have left from your lemonade sales after you've paid for the ingredients, supplies, and also paid back any loans (including interest) you took to start or run your stand.
Example: Let's continue with the lemonade stand. You have the same $50 left after paying for your expenses. But, suppose you had taken a loan to start your stand and you need to pay $10 every month towards this loan. After paying this $10, you are left with $50 - $10 = $40. This $40 is your LFCF because it's the cash you have after paying all expenses and your loan payments.
Key Differences
Debt Impact: UFCF doesn't consider debt, while LFCF does. This is why UFCF is often used to value a business without the impact of its capital structure (how it is financed), and LFCF is used when the impact of debt is important.
Investment Decisions: UFCF is useful for comparing companies regardless of how they are financed. LFCF, however, is more about understanding how much cash is available to shareholders after all obligations are met.
RECS, RECS, RECS
Curated by AD Alumni Fellow, Oluwadamilola "Damie" Ajibola
Wall Street Journal and New York Times:
The Wall Street Journal is renowned for its focus on business and financial news, offering in-depth analysis of economic trends, market developments, and corporate affairs. On the other hand, The New York Times is a general newspaper covering a wide range of topics, including national and international news, politics, culture, and more.
How to Make Friends and Influence People by Dale Carnegie:
The book is a classic self-help book that imparts valuable insights on effective interpersonal skills. The book doesn't just focus on being likable but delves into principles that help individuals navigate social and professional relationships successfully.
Bloomberg Wall Street Week:
This is a podcast that provides the latest updates on market and world news. Covering a wide range of financial topics, it offers concise and accurate insights into the dynamic landscape of global markets. Tune in to stay informed about the most recent developments shaping the world of finance.
