Title: Steven E. Buller
1Managing Transformational Growth
- Steven E. Buller
- Chief Financial Officer
November 18, 2006
2Forward-Looking Statement
- This presentation, and other statements that
BlackRock may make, may contain forward-looking
statements within the meaning of the Private
Securities Litigation Reform Act, with respect to
BlackRocks future financial or business
performance, strategies or expectations.
Forward-looking statements are typically
identified by words or phrases such as trend,
potential, opportunity, pipeline,
believe, comfortable, expect, anticipate,
current, intention, estimate, position,
assume, outlook, continue, remain,
maintain, sustain, seek, achieve, and
similar expressions, or future or conditional
verbs such as will, would, should, could,
may or similar expressions. - BlackRock cautions that forward-looking
statements are subject to numerous assumptions,
risks and uncertainties, which change over time.
Forward-looking statements speak only as of the
date they are made, and BlackRock assumes no duty
to and does not undertake to update
forward-looking statements. Actual results could
differ materially from those anticipated in
forward-looking statements and future results
could differ materially from historical
performance. - In addition to factors previously disclosed in
BlackRock's SEC reports and those identified
elsewhere in this communication, the following
factors, among others, could cause actual results
to differ materially from forward-looking
statements or historical performance (1) the
introduction, withdrawal, success and timing of
business initiatives and strategies (2) changes
in political, economic or industry conditions,
the interest rate environment or financial and
capital markets, which could result in changes in
demand for products or services or in the value
of assets under management (3) the relative and
absolute investment performance of BlackRock's
investment products, including its separately
managed accounts and the former Merrill Lynch
Investment Managers (MLIM) business (4) the
impact of increased competition (5) the impact
of capital improvement projects (6) the impact
of future acquisitions or divestitures (7) the
unfavorable resolution of legal proceedings (8)
the extent and timing of any share repurchases
(9) the impact, extent and timing of
technological changes and the adequacy of
intellectual property protection (10) the impact
of legislative and regulatory actions and reforms
and regulatory, supervisory or enforcement
actions of government agencies relating to
BlackRock, Merrill Lynch or PNC (11) terrorist
activities and international hostilities, which
may adversely affect the general economy,
domestic and local financial and capital markets,
specific industries, and BlackRock (12) the
ability to attract and retain highly talented
professionals (13) fluctuations in foreign
currency exchange rates, which may adversely
affect the value of advisory fees earned by
BlackRock (14) the impact of changes to tax
legislation and, generally, the tax position of
the Company (15) BlackRock's ability to
successfully integrate the MLIM business with its
existing business (16) the ability of BlackRock
to effectively manage the former MLIM assets
along with its historical assets under
management and (17) BlackRock's success in
maintaining the distribution of its products. - BlackRock's Annual Reports on Form 10-K and
BlackRock's subsequent filings with the SEC,
accessible on the SEC's website at
http//www.sec.gov and on BlackRocks website at
http//www.blackrock.com, discuss these factors
in more detail and identify additional factors
that can affect forward-looking statements.
3Introduction My Background
- BA Degree from Northwestern University in 1973
- Master of Management Degree from Northwestern
University in 1975
- Partner and Co-Director of the Global Asset
Management Services practice at Ernst Young LLP
from 1975 2005
- Currently, Managing Director Chief Financial
Officer of BlackRock, Inc. (NYSE BLK)
4Managing Transformational Growth
- Todays Discussion
- Introduction to BlackRock
- Globalization The Defining Trend in Investment
Management
- Managing Transformational Growth
- Questions
5BlackRock A Historical Perspective
2006 Transformational Merger w/ MLIM
Assets Under Management ( Billions)
1995 Merged with PNC, offered common vision
1999 IPO (NYSE)
1988 Founded Blackstone Financial Management
2005 SSR acquisition
2000 BlackRock Solutions
1992 Changed name to BlackRock
Asset as of September 30, 2006
6BlackRock Transformational Change
- Merger with Merrill Lynch Investment Managers
- Announced agreement to acquire Merrill Lynch
Investment Managers (MLIM) on February 15, 2006
- Closed September 29, 2006
- BlackRock issued 65 million shares to Merrill
Lynch in exchange for MLIM (9.5 billion)
- Created one of the largest investment management
firms in the world
7BlackRock has Achieved Strong Growth
675 growth in revenue from 01 06 (Pro-Forma)
Market Cap increased from 2 billion to 18 bill
ion thru 9/30/06
Revenue Market Cap Growth
2007 Revenues based on Annualized, 6/30/06,
Pro-Forma Revenues as shown in Form S-4, August
2006.
8But First, Lets Discuss Industry Trends
9Globalization The Defining Trend in Investment
Mgt.
- The World is Changing
- The world is big and getting bigger
- The world is flat and getting flatter
- Significantly impacting markets
- Influencing investment approaches
Globalization is the defining trend of our times
10Globalization The World is Getting Bigger
Global Financial Assets
- Explosive growth in the capital markets,
particularly outside the United States
in trillions
Source McKinsey Global Institute
11Globalization Flatter Means More Interdependent
- Fundamental implications for markets and policies
- International reliance on the US consumer
- US reliance on foreign buyers of US bonds
2005 Account Balances
Oil Exporters 328b
China Emg Asia 140b 68b
Japan Euro 153b 24b
Rest of World 92b
US 805b
Source Lawrence Summers, Reflections on Global
Account Imbalances, Rest of world includes
statistical discrepancy
12Globalization We Have Benefited from
Dollarization
- But official institutions are now struggling to
figure out what to do with their excess liquidity
Official Foreign Exchange Reserves
Source IMF
13Globalization Dollarization Eventually Will End
Foreign Investment in US Debt (Rolling Six Month
Sum - in billions)
Sources Bloomberg National Bureau of
Statistics, China.
14The time was right for change.
We had to adapt to the changing environment and
the opportunities.
15What We Did
- Brought together two great organizations
- Common culture of teamwork and excellence
- Singular focus on investment and risk management
- Enhanced ability to help clients solve problems
- Breadth and depth of capabilities that can set us
apart
- Highly leveragable operating platform to
facilitate information sharing, efficiency and
integrity
- Truly global presence key to competing in a flat
world
16What We Did
And it is a Perfect Fit of Complimentary
Strengths
Great Performance
17Why We Did It
- Our industry is changing
- Institutional investors want broader
relationships with fewer managers
- Deep intellectual capital and creative solutions
are essential
- Globalization is an imperative, not an option
- Operating and financial scale is increasingly
critical
18What We Created - BlackRock Today
- Global provider of investment and risk management
services
- Over USD 1 trillion in assets under management
- Among the 10 largest investment managers in the
world
- The largest publicly traded asset manager in the
United States
Assets Under Management By Product
Before 461.1 billion
After 1.075 trillion
6/30/06
9/30/06
19BlackRock Today
- A substantially Greater Global Presence
- Headquartered in New York City, offices in 18
countries and 36 cities
- 4,700 employees Over one-third based outside
the US
- 14 investment centers across the US, UK, Japan
and Australia
Assets Under Management by Region
Before 461.1 billion
After 1.075 trillion
6/30/06
9/30/06
20A Truly Global Franchise
Employees
Investment Centers
21Managing Transformational Growth
Our World Got a Lot More Complicated
22The Process Starts Early
- Take good notes at Kellogg
What you learn is central to the process -
Finance always plays a central role
23Managing Transformational Growth
24Growth Opportunities (MA Analysis)
- Understand market factors and business trends
- Define strategy
- Analyze risks
- Identify candidates
- Prepare pro-forma models
- Consult with investment bankers and counsel
- Step back - look at entire picture make sure
pieces fit together
25Managing Transformational Growth
26Leadership and Culture
- Build strong leadership encourage teamwork
- Establish and communicate culture values
- Understand your global environment adapt
accordingly
- Tailor your organizational structure
- Focus on performance and clients
- There are no precise formulas to follow
- Find the right balance
- Develop tools to facilitate decentralization
- Share information and collaborate on behalf of
clients
- Expect and reward excellence
27Managing Transformational Growth
28Infrastructure A Single Technology Platform
Global Network - 13 Data Centers. One Platform
is Essential.
Global Network
The sun never setsWe manage a 24x7 operation
29Infrastructure - A Single Technology Platform
Achieves
30Infrastructure A Single Platform Supports
- 70 million option adjusted calculations per
week
- 3.5 million transactions annually
- 4,000 portfolios
- 4 trillion in assets on platform
- 800,000 investment positions
- 90 of the worlds largest investment
organizations
Technology and risk management
supported by more than 1,000 professionals
31Managing Transformational Growth
32Financial Oversight Added Complexity
33Financial Oversight Legal Entities Increased 6x
34Financial Oversight Global Challenges
- Revenue volatility recognition
- Regulatory capital compliance
- Staffing headcount
- Cash management
- General administrative expenses
- Unusual items (MA)
- Daily processes (payroll, payables, etc.)
- Global Sarbanes-Oxley compliance
- Financial reporting
35Financial Oversight Financial Reporting
Challenges
Foreign Currency Translation
COMPENSATION (Stock based, options, incentives)
convertible debt
Leases
Real Estate
Extinguishment of Liabilities
EPS/Other Comprehensive Income
Related Party Transactions
Servicing of Financial Assets
Purchase Price Allocation
IAS
DERIVATIVES
Embedded Derivatives
Partnership Accounting
Variable Interest Entities
Investment Company Accounting
SPEs
Software Costs
Revenue Recognition
SEC Reporting
Global, State Local Taxes
Hedging
Investments
CONTINGENCIES
DEFINED BENEFIT PENSION / DEFINED CONTRIBUTION
PLANS
hybrid instruments
36Financial Oversight Build Strong Controls
- Assess, document and enhance controls
- Automate controls and monitoring
- Utilize one General Ledger and consolidation
process
- Leverage auditors/internal auditors
- Utilize functional and geographic oversight
- Hire smart, experienced leaders who know local
markets
- No tolerance policy
37Financial Oversight People Processes Are Key
- Culture sets a standard and reinforces positive
behavior
- Need uniform policies and procedures
- Regional / functional matrix is key
- Management reporting must support
decentralization of day-to-day governance,
together with clear accountability
- Systems and communications must support unified
platform and team
38Financial Oversight Refine Management Metrics
- New revenue / at-risk revenue / opportunities
- Headcount and compensation
- Expenses by department and function
- Budget forecast variances
- Ratios (operating margin, compensation, sales)
- Cash flows
- MA costs and synergies, settlements
39Conclusion Managing Transformational Growth
- Key Points
- Adapt to your global environment
- Build strong leadership
- Establish and communicate culture values
- Develop a tailored and scaleable infrastructure
- Focus on performance and clients
- Build strong financial oversight
- Take good notes at Kellogg
40Managing Transformational Growth
Questions?