A Wall St. star hits the even bigger time
Larry Fink's firm, BlackRock, just merged with Merrill Lynch's investment management business to create a $1 trillion colossus.
(FORTUNE Magazine) - Larry Fink, co-founder and CEO of money-management firm BlackRock, which just agreed to merge with Merrill Lynch's investment-management business, is in a car on his way from Manhattan to central New Jersey. He's going to sell the idea of the new colossus -- which will boast some $1 trillion in assets -- to Merrill employees at two town-hall meetings.
He's exhausted from long nights toning the deal but also in a buoyant mood, and why not? In a rare trifecta, shares of BlackRock (Research), Merrill Lynch (Research), and PNC (Research) (the Pittsburgh bank that owns a big stake in BlackRock) all rose after the deal was announced. Now all Fink has to do is integrate his business and Merrill's into one big, happy, global giant--and make sure his employees and customers are satisfied too. Piece of cake, right? Fink talked strategy by phone with FORTUNE's Andy Serwer.
You spoke with three or four firms about merging. Yet you were growing briskly on your own. Why do a deal?
We were looking to expand more in equities [BlackRock had been mostly a bond house] and more internationally. A deal like the one we did, to double in size, is like leapfrogging. It would have taken us many, many millions of dollars and five to seven years to achieve that otherwise.
Why didn't you do a deal with your pal John Mack at Morgan Stanley? You couldn't agree on issues of control and succession?
I really don't want to get into that. We had talked with Morgan Stanley since October. With Stan O'Neal [CEO of Merrill Lynch] we negotiated for five weeks. The fit with Merrill was obvious from the start.
How has BlackRock done so well as a bond investor? What's the secret sauce?
It's really the culture and our processes. Risk management is a part of it. We have a disciplined, regimented way of doing business in good markets and bad, and we just try to never stray from it.
Can that translate into equities and retail?
The short answer is yes. First, we have tens of billions in equities and retail already, and we do a good job. Second, I would argue that managing in the investing business is not so different by product. Fixed income is more centralized -- you use scale and technology more. Equities are more decentralized. But the successful elements are the same: consistency, focus on performance, rigorous oversight. Look at a [COO] Lloyd Blankfein at Goldman Sachs. He started in commodities; now he has broad responsibility over the entire firm.
Since going public in 1999, BlackRock stock is up more than tenfold. You own a couple hundred million dollars' worth; other people at the firm have gotten rich too. Aren't you concerned everyone will leave?
I worry about that. But I called in all my [top people] one by one before the deal and asked them if they were in. And they said, "This is great. We're onboard." Yes, there's been some serious wealth creation. But there are a lot of people on Wall Street like that. What would I do if I retired?