How Adebayo Ogunlesi’s contrarian bet led to $12.5bn BlackRock tie-up

Adebayo Ogunlesi, co-founder of Global Infrastructure Partners, credits his wife Amelia for a career switch that led on Friday to a $12.5bn deal and a leadership position at BlackRock, the world’s largest money manager.

In 2005, Ogunlesi, then a top banker at Credit Suisse, was summoned to Omaha, Nebraska, by the energy arm of Warren Buffett’s Berkshire Hathaway to study a large takeover. It was the kind of call most financiers dream of, but Ogunlesi complained to his wife: “I really don’t want to go.”

In an interview with the Financial Times, he said his wife offered an ultimatum: “Either you decide you like your job and you want to keep doing it. Or, if you decide you don’t, go find something else. But please don’t think you can spend the next five years moaning.”

After that “kick in the behind”, Ogunlesi quit banking and at the age of 52, decided to try his hand as an investor.

Ogunlesi and a handful of colleagues, mostly from Credit Suisse, considered private equity, then near the apex of a pre-financial-crisis takeover bubble. But they opted for a contrarian bet, raising a fund to invest in the niche sector where he had done his first deal in 1983: the financing and operating of airports, energy plants and other crucial infrastructure. 

“We picked infrastructure because that was an area where there was very little competition,” said Ogunlesi, now 70.

In just 17 years, GIP quietly amassed $105bn in assets and pioneered a booming $1tn sector that is one of the fastest growth segments of money management. BlackRock chief executive Larry Fink said Friday’s deal was “transformational” for the larger group’s ambitions in private markets.

The tie-up will put Ogunlesi on BlackRock’s board and global executive committee, pushing the publicity-shy Nigerian-born financier into the spotlight. It also cements his status as one of Wall Street’s wealthiest and most powerful figures. He and his GIP colleagues will collectively become the second largest shareholders of BlackRock, a nearly $120bn company.

“In the early days, people underestimated ‘Bayo’,” said Kenneth Chenault, former CEO of American Express, and a close friend of Ogunlesi since both were at Harvard Law School. “He was flying under the radar and then people woke up one day and saw [GIP] was a $50bn fund . . . What he has done is amazing and historic.”

Raised in Lagos by a father who was the first Nigerian professor of medicine and a mother who ran a nursery school, Ogunlesi earned a first class degree at Oxford university, and law and business degrees from Harvard.

Ogunlesi then won a prestigious Supreme Court clerkship working for Thurgood Marshall, the first black justice: “It was one of the best jobs I’ve ever had,” he said. The justice provided a model that still influences him today. 

“When you watch somebody who’s a giant or an icon and see that he conducts himself as a normal person, you cannot help but learn from that,” said Ogunlesi. “Be serious in what you do but don’t take yourself too seriously. When you become pompous, nobody wants to be around you.”

He moved to New York to work at the Cravath law firm but quickly jumped to First Boston, later bought by Credit Suisse, to work on a Nigerian gas project. Six months in, the deal died when Nigeria experienced a coup and Ogunlesi’s client nearly went to jail. “I learned very early on that there is a lot of political risk associated with infrastructure projects,” he said.

At Credit Suisse, Ogunlesi forged the connections that later helped GIP succeed. He ruffled feathers with a brutal early 2000s restructuring of the investment bank, and later became chief client officer. When Ogunlesi and his co-founders struck out on their own to launch GIP in 2006, Credit Suisse’s then-CEO Oswald Grübel backed them with $1bn of the bank’s money. A meeting with Jeff Immelt led to $500mn more from General Electric.

Building a business let Ogunlesi implement another of Marshall’s principles: “If you can find people who are smarter than you, surround yourself with them and consider your job as a leader to be clearing obstacles out of their way and inspiring them to do the best that they possibly can.”

The first years were not easy. A $600mn equity investment in UK waste management company Biffa in early 2008 proved disastrous. Fallout from the global financial crisis drove down activity at its customers such as restaurants and construction sites, and it lost business to fly-by-night competitors. Telling investors in 2012 that the stake’s value had dropped to $93mn was “the most mortifying moment in my career as CEO,” Ogunlesi said. “The moral of the story is: avoid businesses where there are no barriers to entry.”

Failed infrastructure investments are particularly painful, because margins are thinner than in traditional corporate buyouts. “You cannot afford to have an investment that turns out to be a zero,” Ogunlesi said. 

GIP was one of the first private fund specialists to hire a powerful chief risk officer, and was an early advocate of operational improvements to boost the value of infrastructure assets. Its first investment, a 2006 stake in London City airport, sold a decade later for four times the original purchase.

At London Gatwick airport, GIP introduced oversized luggage trays and other innovations that cut security screening times by more than half, freeing passengers to spend more in restaurants and shops where GIP received a concession.

“The thing about infrastructure businesses is a lot of them are monopolies and monopolies tend not to focus on customer service,” Ogunlesi said. “There are things you can do to generate improvements in operational efficiency and customer service and, obviously, revenues.”

GIP’s sprawling portfolio also includes Sydney and Edinburgh airports, the port of Melbourne, critical US pipelines, CyrusOne data centres and Italo high-speed rail. Its companies have combined annual revenues of $75bn and 115,000 employees.

The BlackRock deal aims to open the door to even larger investments by leveraging the heft of a $10tn asset management goliath that is a top shareholder of most global companies.

“This is not about cashing out,” Ogunlesi said. “It is about the opportunity we have as part of BlackRock to build what is without question the premier infrastructure investing business. That’s the mission I’m on.”  

Most of the $12.5bn price tag will be paid in BlackRock shares, and 40 per cent will not vest for five years. Ogunlesi and GIP president Raj Rao will lead a division that combines GIP with BlackRock’s $50bn infrastructure business.

Though Ogunlesi will have his first boss in 18 years, he said Fink, a friend since both worked at First Boston, has downplayed the potential for conflict: “Larry said to me: ‘You will be on the board of directors, you will be my boss’. I think we have mutually assured destruction.”

Joining BlackRock will immediately increase Ogunlesi’s public profile, something he has resisted while serving on the boards of Goldman Sachs, the Lincoln Center and two hospitals. A pragmatist, he golfed with George W Bush and served with Fink on Donald Trump’s economic advisory council. But he also chairs Joe Biden’s infrastructure advisory council and most of his $220,000 in political donations went to Democrats.

Asked why he has remained so private, the father of two laughed. “I don’t need to read about myself,” he said. “I know enough about myself and who I am.”

Friends say that Ogunlesi, a passionate cricket and Tottenham Hotspur fan, makes time for them at critical moments. When Ken Frazier, another law school friend, was CEO of Merck and facing criticism for refusing to cut research budgets, Ogunlesi reassured him he was doing the right thing. Last summer, Frazier’s daughter fell ill in California while both men were at a wedding in Italy, so Ogunlesi volunteered his private plane.

Ogunlesi, a director of Topgolf Callaway Brands, said that he had become an “atrocious golfer” since knee surgery. But Chenault, who plays regularly with him, said this self-deprecation minimises his “competitive fire”.

“He is not a ‘master of the universe’ persona, but at the same time, don’t try to fool Bayo. He will shred you to pieces,” Chenault said.