Private Credit Going Vertical
Vertical integration has arrived on the scene of private credit, and it’s reshaping who controls capital.
What’s Vertical Integration?
You’ve probably heard of vertical integration before, even if you didn’t know the name. Apple went vertical when it stopped relying on outside chip manufacturers and built its own. Netflix took part when it stopped licensing content from studios and started making its own shows, starting with Lilyhammer. The logic is akin: own more of the process, capture more of the profit, and stop depending on someone else’s timeline.
This exact move has been happening in private credit, and the scale of it is larger than most people realize.
To give you a sense of what “larger than most people realize” means: in December 2024, BlackRock announced a $12 billion all-stock acquisition of HPS Investment Partners, creating a combined private credit franchise of roughly $220 billion in AUM. It lifted BlackRock’s private markets fee-paying AUM by an expected 40%.
Apollo Global Management, meanwhile, now operates 16 standalone origination platforms staffed by nearly 4,000 professionals, originating tens of billions of dollars in loans every year - including a $25 billion direct-lending program built with Citi.
Blue Owl spent 2024 alone closing on Atalaya Capital Management (a $10B+ AUM asset-based credit specialist that had deployed $17 billion of capital, ~70% of it sourced directly rather than through middlemen), as well as Kuvare Asset Management and Prima Capital Advisors.
This is a display of how some of the largest money managers on Earth rewiring how credit gets created!
As “big” as they are, the largest funds were facing a few ornate issues prior to applying this M&A tactic:
If you’re managing tens or hundreds of billions of dollars in a credit strategy, your returns depend on the volume and quality of deals that come to you.
But, YOU don’t control that pipeline. You rely on third-party companies, called originators, to source, underwrite, and bring you loan opportunities.
The originator takes a cut, you provide the capital, and the system works fine - that is, until you’re too big for it to keep up with you.
What’s Driving the Boat?
The 2022 inflection isn’t random. Three forces converged:
The 2023 banking shock. After SVB, Signature, and Credit Suisse failed in March 2023, regulators tightened capital and liquidity rules on banks. Regional and mid-sized banks pulled back hardest from exactly the middle-market and asset-based lending that private credit funds now want to own.
Higher rates made ABL economically obvious. With base rates elevated, floating-rate loans backed by hard collateral started clearing double-digit yields with comparatively low loss history — making the operational lift of owning a specialty finance platform actually worth it.
Mega-fund deployment pressure. Private credit AUM has more than tripled since 2015, and Preqin (insights software for the alternative assets industry, acquired by BlackRock in 2025!) projects it’ll add roughly another trillion in the next five years to reach $2.3 trillion. At that scale, you can’t wait for deals to come to you, you really just have to build the door.
Specialty Finance Companies
The biggest players, BlackRock, Apollo, Ares, Bain Capital, Blue Owl, and others, decided to flip the model entirely. They just started building the machines that generate the deals themselves.
These machines are called specialty finance companies, and they make loans backed by real assets like equipment and inventory rather than just a borrower’s credit score.
This type of lending is called asset-based lending, or ABL, and it sits at the intersection of private credit and real-economy lending.
For example, when a manufacturing company needs financing to expand its equipment fleet, or a business wants to borrow against its receivables, a specialty finance company is often the one writing that loan. What changed here is who owns those specialty finance companies.
Receivables in this context would be something like unpaid invoices. If a business has delivered goods or services to customers but hasn’t been paid yet, those outstanding invoices are considered receivables. Rather than waiting 30, 60, or 90 days to collect, the business can borrow against that future income today, using the invoices themselves as collateral.
According to data compiled by Edgar Matthews & Co., only 6 of these fund-sponsored platforms were formed in the seven years between 2015 and 2021.
Since then, 9 more have launched in just three years - the acceleration is not subtle at all, and the timing maps cleanly onto the banking-stress and rate-regime shifts above. The logic behind it is also clear: research from the firm suggests that building a platform from scratch can generate IRRs in the range of 18 to 31 percent over a five-year period, compared to 12 to 24 percent when buying an existing platform at a premium.
The difference comes down to entry price. When you build from scratch, you start at book value. When you acquire, you often pay 1.2 to 2.0 times that.
P.S. Book value is essentially what a company is worth on paper: its assets minus its liabilities. Paying above book value means you’re also paying for intangibles like brand, relationships, and existing deal flow.
By owning the origination platform, a fund controls every stage. It decides which loans get made, captures fees at origination, and deploys its own capital into deals it created. The compounding advantage this builds over time is enormous. Smaller funds without their own platforms are competing for whatever deal flow reaches them, while the vertically integrated giants are building a moat.
Banks, which have historically played a central role in originating and distributing this kind of lending, are being quietly cut out. They may not be disappearing from this market so much as being repositioned: losing share in middle-market ABL, while gradually and simultaneously becoming the financiers of the private credit funds themselves through fund-finance and NAV lines.
What Impact Does This Have?
If you work in finance, invest capital, run a business that borrows money, or just want to understand where power is shifting in the economy, this trend affects you whether you can see it yet or not. The funds involved are not small players experimenting at the margins. They’re some of the largest pools of capital on Earth, and they are rewriting the standards of who gets to originate credit, on what terms, and at what cost.
When the entities controlling your access to capital also control the platforms that decide whether you qualify for it, the implications for borrowers, banks, and smaller investors are enormous.
What makes this worth paying attention to right now is that most people are still watching the scoreboard (being, private credit’s headline growth from $200 billion to $1.7 trillion over the past decade) without understanding the structural shift underneath it.
The scoreboard tells you that private credit is winning. The de-novo platform story tells you how the game is actually being reconfigured in favor of the companies driving this change, as well as why that gap is only going to widen.
Getting ahead of this now means you understand the next decade of finance before most people have even started asking the questions.
New Vocabulary Shortlist
Vertical Integration: When a company stops relying on outside partners and just owns the whole process itself. Apple making its own chips instead of buying them. Netflix making its own shows instead of licensing them.
Private Credit: Loans made by investment funds instead of banks. A business borrows directly from Apollo or Ares rather than going to JPMorgan. It all happens outside of public markets.
Originator: The middleman who finds the borrower, assesses the risk, and brings the deal to whoever is providing the money.
Specialty Finance Companies: Niche lenders focused on a specific type of loan, like equipment or small business financing, rather than general banking. Faster and more focused than a traditional bank.
Asset-Based Lending (ABL): Loans backed by something physical or tangible, like equipment, inventory, or invoices, rather than just a credit score. If you can’t repay, lenders take the asset (or already has it in custody as collateral).
Receivables: Money a business is owed but hasn’t collected yet. If a client owes you $200k and has 60 days to pay, that’s a receivable. You can borrow against it to get cash now.
Book Value: What a company is worth on paper, which is usually the accounting baseline before you factor in brand value and/or future potential.
Deal Flow: The pipeline of investment or lending opportunities coming into a fund. More deal flow means more opportunities to put money to work.
IRR (Internal Rate of Return): How profitable an investment is, expressed as an annualized percentage. An IRR of 20% means your money is roughly growing at 20% per year.
Moat: A competitive advantage that is hard for others to copy or cross, just like a moat protects a castle. In business, a moat might be brand loyalty, proprietary technology, or, in this case, owning your own origination platform so competitors can’t access the same deal flow you can!
Sources
Conor Whit of Setpoint on X
Edgar Matthews & Company, Webpage and LinkedIn for whitepaper