Steven E. Buller Chief Financial Officer


Published on

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide
  • BlackRock has one of the most dynamic growth stories on Wall Street. In the past 18 years, we’ve grown from $0 to $1 trillion in managed assets. We understand that our continued growth depends on our ability to provide value for our clients and on our ability to help financial advisors grow their business. We are intensely committed to these needs.
  • Steven E. Buller Chief Financial Officer

    1. 1. Steven E. Buller Chief Financial Officer Managing Transformational Growth November 18, 2006
    2. 2. Forward-Looking Statement <ul><li>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 BlackRock’s 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. </li></ul><ul><li>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. </li></ul><ul><li>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. </li></ul><ul><li>BlackRock's Annual Reports on Form 10-K and BlackRock's subsequent filings with the SEC, accessible on the SEC's website at and on BlackRock’s website at , discuss these factors in more detail and identify additional factors that can affect forward-looking statements. </li></ul>
    3. 3. Introduction: My Background <ul><li>BA Degree from Northwestern University in 1973 </li></ul><ul><li>Master of Management Degree from Northwestern University in 1975 </li></ul><ul><li>Partner and Co-Director of the Global Asset Management Services practice at Ernst & Young LLP from 1975 – 2005 </li></ul><ul><li>Currently, Managing Director & Chief Financial Officer of BlackRock, Inc. (NYSE: BLK) </li></ul>
    4. 4. Managing Transformational Growth <ul><li>Today’s Discussion </li></ul><ul><ul><li>Introduction to BlackRock </li></ul></ul><ul><ul><li>Globalization – The Defining Trend in Investment Management </li></ul></ul><ul><ul><li>Managing Transformational Growth </li></ul></ul><ul><ul><li>Questions </li></ul></ul>
    5. 5. BlackRock – A Historical Perspective 2006: Transformational Merger w/ MLIM Assets Under Management ($ Billions) 2005: SSR acquisition 2000: BlackRock Solutions ® 1999: IPO (NYSE) 1988: Founded Blackstone Financial Management 1992: Changed name to BlackRock 1995: Merged with PNC, offered common vision *Asset as of September 30, 2006
    6. 6. BlackRock – Transformational Change <ul><li>Merger with Merrill Lynch Investment Managers </li></ul><ul><ul><li>Announced agreement to acquire Merrill Lynch Investment Managers (MLIM) on February 15, 2006 </li></ul></ul><ul><ul><li>Closed September 29, 2006 </li></ul></ul><ul><ul><li>BlackRock issued 65 million shares to Merrill Lynch in exchange for MLIM ($9.5 billion) </li></ul></ul><ul><ul><li>Created one of the largest investment management firms in the world </li></ul></ul>
    7. 7. Revenue & Market Cap Growth 675% growth in revenue from ‘01 – ‘06 (Pro-Forma) Market Cap increased from $2 billion to $18 billion thru 9/30/06 BlackRock has Achieved Strong Growth 2007 Revenues based on Annualized, 6/30/06, Pro-Forma Revenues as shown in Form S-4, August 2006.
    8. 8. But First, Let’s Discuss Industry Trends
    9. 9. <ul><li>The World is Changing </li></ul><ul><li>The world is big and getting bigger </li></ul><ul><li>The world is flat and getting flatter </li></ul><ul><ul><li>Significantly impacting markets </li></ul></ul><ul><ul><li>Influencing investment approaches </li></ul></ul>Globalization – The Defining Trend in Investment Mgt. Globalization is the defining trend of our times
    10. 10. Globalization – The World is Getting Bigger <ul><li>Explosive growth in the capital markets, particularly outside the United States </li></ul>Global Financial Assets $ in trillions Source: McKinsey Global Institute
    11. 11. Globalization – Flatter Means More Interdependent <ul><li>Fundamental implications for markets and policies </li></ul><ul><ul><li>International reliance on the US consumer </li></ul></ul><ul><ul><li>US reliance on foreign buyers of US bonds </li></ul></ul>2005 Account Balances US $805b Oil Exporters $328b Japan Euro $153b $24b Rest of World* $92b China Emg Asia $140b $68b Source: Lawrence Summers, “Reflections on Global Account Imbalances”, * Rest of world includes statistical discrepancy
    12. 12. Globalization – We Have Benefited from Dollarization <ul><li>But official institutions are now struggling to figure out what to do with their excess liquidity </li></ul>Official Foreign Exchange Reserves Source: IMF
    13. 13. Globalization – Dollarization Eventually Will End Foreign Investment in US Debt (Rolling Six Month Sum - $ in billions) Sources: Bloomberg – National Bureau of Statistics, China.
    14. 14. The time was right for change. We had to adapt to the changing environment and the opportunities.
    15. 15. What We Did <ul><li>Brought together two great organizations </li></ul><ul><ul><li>Common culture of teamwork and excellence </li></ul></ul><ul><ul><li>Singular focus on investment and risk management </li></ul></ul><ul><ul><li>Enhanced ability to help clients solve problems </li></ul></ul><ul><ul><li>Breadth and depth of capabilities that can set us apart </li></ul></ul><ul><ul><li>Highly leveragable operating platform to facilitate information sharing, efficiency and integrity </li></ul></ul><ul><ul><li>Truly global presence… key to competing in a flat world </li></ul></ul>
    16. 16. What We Did … And it is a “Perfect Fit” of Complimentary Strengths Great Performance Retail Distribution Institutional Distribution International Platform Domestic Platform Equity Fixed Income MLIM BlackRock
    17. 17. Why We Did It <ul><li>Our industry is changing </li></ul><ul><ul><li>Institutional investors want broader relationships with fewer managers </li></ul></ul><ul><ul><li>Deep intellectual capital and creative solutions are essential </li></ul></ul><ul><ul><li>Globalization is an imperative, not an option </li></ul></ul><ul><ul><li>Operating and financial scale is increasingly critical </li></ul></ul>
    18. 18. What We Created - BlackRock Today <ul><li>Global provider of investment and risk management services </li></ul><ul><ul><li>Over USD 1 trillion in assets under management </li></ul></ul><ul><ul><li>Among the 10 largest investment managers in the world </li></ul></ul><ul><ul><li>The largest publicly traded asset manager in the United States </li></ul></ul>Assets Under Management By Product Before: $461.1 billion After: $1.075 trillion 6/30/06 9/30/06
    19. 19. BlackRock Today Assets Under Management by Region <ul><li>A substantially Greater Global Presence </li></ul><ul><ul><li>Headquartered in New York City, offices in 18 countries and 36 cities </li></ul></ul><ul><ul><li>4,700 employees – Over one-third based outside the US </li></ul></ul><ul><ul><li>14 investment centers across the US, UK, Japan and Australia </li></ul></ul>6/30/06 9/30/06 Before: $461.1 billion After: $1.075 trillion
    20. 20. A Truly Global Franchise Employees * Investment Centers <ul><li>Asia Pacific </li></ul><ul><ul><li>Hong Kong </li></ul></ul><ul><ul><li>Seoul </li></ul></ul><ul><ul><li>Shanghai </li></ul></ul><ul><ul><li>Singapore* </li></ul></ul><ul><ul><li>Taipei </li></ul></ul><ul><ul><li>Tokyo* </li></ul></ul><ul><li>EMEA/Australia </li></ul><ul><ul><li>London* </li></ul></ul><ul><ul><li>Edinburgh* </li></ul></ul><ul><ul><li>Amsterdam </li></ul></ul><ul><ul><li>Eindhoven* </li></ul></ul><ul><ul><li>Frankfurt </li></ul></ul><ul><ul><li>Geneva </li></ul></ul><ul><ul><li>Isle of Man </li></ul></ul><ul><ul><li>Jersey </li></ul></ul><ul><ul><li>Luxembourg </li></ul></ul><ul><ul><li>Madrid </li></ul></ul><ul><ul><li>Milan </li></ul></ul><ul><ul><li>Munich </li></ul></ul><ul><ul><li>Stockholm </li></ul></ul><ul><ul><li>Zurich </li></ul></ul><ul><ul><li>Paris </li></ul></ul><ul><ul><li>Melbourne* </li></ul></ul><ul><ul><li>Sydney* </li></ul></ul><ul><ul><li>Brisbane </li></ul></ul><ul><ul><li>Perth </li></ul></ul><ul><li>North & South America </li></ul><ul><ul><li>New York* </li></ul></ul><ul><ul><li>Princeton* </li></ul></ul><ul><ul><li>Wilmington* </li></ul></ul><ul><ul><li>Boston* </li></ul></ul><ul><ul><li>Philadelphia* </li></ul></ul><ul><ul><li>Pittsburgh </li></ul></ul><ul><ul><li>Florham Park* </li></ul></ul><ul><ul><li>Atlanta </li></ul></ul><ul><ul><li>Chicago </li></ul></ul><ul><ul><li>San Francisco* </li></ul></ul><ul><ul><li>Los Angeles </li></ul></ul><ul><ul><li>Newport Beach </li></ul></ul><ul><ul><li>Toronto </li></ul></ul><ul><ul><li>Montreal </li></ul></ul><ul><ul><li>Montevideo </li></ul></ul>
    21. 21. Our World Got a Lot More Complicated Managing Transformational Growth
    22. 22. The Process Starts Early <ul><li>Take good notes at Kellogg </li></ul>What you learn is central to the process - Finance always plays a central role
    23. 23. Managing Transformational Growth Accounting Finance Statistical & Mathematical Methods for Management Decisions Financial Oversight Operations Marketing Infrastructure Values & Crisis Decision Making Culture Leadership in Organizations Leadership Strategy Economics Growth Opportunities (M&A Analysis) Kellogg Curriculum Considerations
    24. 24. Growth Opportunities (M&A Analysis) <ul><li>Understand market factors and business trends </li></ul><ul><li>Define strategy </li></ul><ul><li>Analyze risks </li></ul><ul><li>Identify candidates </li></ul><ul><li>Prepare pro-forma models </li></ul><ul><li>Consult with investment bankers and counsel </li></ul><ul><li>Step back - look at entire picture – make sure pieces fit together </li></ul>
    25. 25. Managing Transformational Growth Accounting Finance Statistical & Mathematical Methods for Management Decisions Financial Oversight Operations Marketing Infrastructure Values & Crisis Decision Making Culture Leadership in Organization Leadership Strategy Economics Growth Opportunities (M&A Analysis) Kellogg Curriculum Considerations
    26. 26. Leadership and Culture <ul><li>Build strong leadership & encourage teamwork </li></ul><ul><li>Establish and communicate culture & values </li></ul><ul><li>Understand your global environment & adapt accordingly </li></ul><ul><li>Tailor your organizational structure </li></ul><ul><li>Focus on performance and clients </li></ul><ul><li>There are no precise formulas to follow: </li></ul><ul><ul><li>Find the right balance </li></ul></ul><ul><ul><li>Develop tools to facilitate decentralization </li></ul></ul><ul><ul><li>Share information and collaborate on behalf of clients </li></ul></ul><ul><li>Expect and reward excellence </li></ul>
    27. 27. Managing Transformational Growth Accounting Finance Statistical & Mathematical Methods for Management Decisions Financial Oversight Operations Marketing Infrastructure Values & Crisis Decision Making Culture Leadership in Organization Leadership Strategy Economics Growth Opportunities (M&A Analysis) Kellogg Curriculum Considerations
    28. 28. Infrastructure – A Single Technology Platform Global Network -– 13 Data Centers. One Platform is Essential. Global Network The sun never sets…We manage a 24x7 operation
    29. 29. Infrastructure - A Single Technology Platform Achieves… Enhancements are continuously made available to all clients Ability to Evolve Models and Systems - Too many systems subject to “the weakest link” Comprehensive design Process Scalability and Efficiency - Systems often constrain trading One fully integrated system Operating Controls - Too many systems = constant reconciliation and data challenges One source of risk modeling and reporting at an enterprise level Effective Risk Monitoring - Know the risks you take Single quality-controlled set of data Data Integrity - Trust the information you get One database provides consistency and transparency Information Transparency - Find the information you need BRS Solution Goal
    30. 30. Infrastructure – A Single Platform Supports… <ul><li>70+ million option adjusted calculations per week </li></ul><ul><li>3.5 million transactions annually </li></ul><ul><li>4,000 portfolios </li></ul><ul><li>$4 trillion in assets on platform </li></ul><ul><li>800,000 investment positions </li></ul><ul><li>90 of the world’s largest investment organizations </li></ul>Technology and risk management supported by more than 1,000 professionals
    31. 31. Managing Transformational Growth Accounting Finance Statistical & Mathematical Methods for Management Decisions Financial Oversight Operations Marketing Infrastructure Values & Crisis Decision Making Culture Leadership in Organization Leadership Strategy Economics Growth Opportunities (M&A Analysis) Kellogg Curriculum Considerations
    32. 32. Financial Oversight – Added Complexity 20,550 3,300 Accounts Billed 19 6 Payroll Countries 23 4 Required Local Country Reporting 6 2 Accounting Locations 17 2 GL Sets of Books 2 1 Calendars 11 3 Functional Currencies 155 26 Legal Entities 30 14 Payroll Companies Post-Merger Pre-Merger
    33. 33. Financial Oversight – Legal Entities Increased 6x
    34. 34. Financial Oversight – Global Challenges <ul><li>Revenue volatility & recognition </li></ul><ul><li>Regulatory & capital compliance </li></ul><ul><li>Staffing & headcount </li></ul><ul><li>Cash management </li></ul><ul><li>General & administrative expenses </li></ul><ul><li>“Unusual items” (M&A) </li></ul><ul><li>Daily processes (payroll, payables, etc.) </li></ul><ul><li>Global Sarbanes-Oxley compliance </li></ul><ul><li>Financial reporting </li></ul>
    35. 35. Financial Oversight – Financial Reporting Challenges Purchase Price Allocation Global, State & Local Taxes CONTINGENCIES Revenue Recognition Investment Company Accounting Variable Interest Entities SEC Reporting convertible debt Partnership Accounting Extinguishment of Liabilities DEFINED BENEFIT PENSION / DEFINED CONTRIBUTION PLANS COMPENSATION (Stock based, options, incentives) Leases DERIVATIVES Investments Related Party Transactions EPS/Other Comprehensive Income Foreign Currency Translation hybrid instruments Servicing of Financial Assets IAS Software Costs Hedging Real Estate Embedded Derivatives SPEs
    36. 36. Financial Oversight – Build Strong Controls <ul><li>Assess, document and enhance controls </li></ul><ul><li>Automate controls and monitoring </li></ul><ul><li>Utilize one General Ledger and consolidation process </li></ul><ul><li>Leverage auditors/internal auditors </li></ul><ul><li>Utilize functional and geographic oversight </li></ul><ul><li>Hire smart, experienced leaders who know local markets </li></ul><ul><li>No tolerance policy </li></ul>
    37. 37. Financial Oversight – People & Processes Are Key <ul><li>Culture sets a standard and reinforces positive behavior </li></ul><ul><li>Need uniform policies and procedures </li></ul><ul><li>Regional / functional matrix is key </li></ul><ul><li>Management reporting must support decentralization of day-to-day governance, together with clear accountability </li></ul><ul><li>Systems and communications must support unified platform and team </li></ul>
    38. 38. Financial Oversight – Refine Management Metrics <ul><li>New revenue / at-risk revenue / opportunities </li></ul><ul><li>Headcount and compensation </li></ul><ul><li>Expenses by department and function </li></ul><ul><li>Budget & forecast variances </li></ul><ul><li>Ratios (operating margin, compensation, sales) </li></ul><ul><li>Cash flows </li></ul><ul><li>M&A: costs and synergies, settlements </li></ul>
    39. 39. Conclusion: Managing Transformational Growth <ul><li>Key Points – </li></ul><ul><li>Adapt to your global environment </li></ul><ul><li>Build strong leadership </li></ul><ul><li>Establish and communicate culture & values </li></ul><ul><li>Develop a tailored and scaleable infrastructure </li></ul><ul><li>Focus on performance and clients </li></ul><ul><li>Build strong financial oversight </li></ul><ul><li>Take good notes at Kellogg </li></ul>
    40. 40. Managing Transformational Growth Questions?