A subsidiary of Ares Management Corporation (Ares) (NYSE: ARES) has has entered into a definitive agreement with a subsidiary of BrightSphere Investment Group Inc (NYSE: BSIG) and Landmark Investment Holdings LP to acquire 100 per cent of Landmark Partners, LLC (collectively with its subsidiaries, Landmark), one of the largest and most experienced investors in acquiring secondary private fund ownership stakes in the alternative asset management industry.
The transaction is valued at USD1.08 billion, including approximately USD787 million in cash and approximately USD293 million in Ares Operating Group Units, in each case subject to certain adjustments.
With 150 employees across six global offices, Landmark manages private equity, real estate and infrastructure secondaries funds totalling USD18.7 billion in assets under management as of 31 December 31 2020. Supported by a global, institutional investor base of more than 600 fund investors, Landmark is viewed as a trusted and innovative counterparty in developing flexible transaction solutions to an extensive roster of financial sponsors and institutional investors. Landmark was founded in 1989 and is led by its highly experienced management team who have capitalised on the increasing investor appetite for private market secondaries with a compound annual growth rate of 17 per cent in its assets under management over the past four years.
“We are incredibly proud to announce this transaction with Landmark, a pioneer in developing the asset class of private market secondaries,” says Michael Arougheti, Chief Executive Officer and President of Ares. “We believe secondary investments are only increasing in their appeal to a growing group of investors and we are excited to include these strategies in our comprehensive alternatives offering. We have known Landmark’s leadership team for many years and hold them in high regard for their approach to partnership and demonstrated ability to develop creative, win-win solutions. We look forward to welcoming Frank Borges, Tim Haviland and their colleagues and we expect significant benefits for our investors, employees and other stakeholders from this combination.”
“We are excited to join forces with Ares as we enter this new chapter in Landmark’s history,” says Francisco Borges, Chairman and Managing Partner of Landmark Partners. “Ares’ global platform and significant resources will enhance our combined investment capabilities and my partners and I look forward to driving continued strong performance, transaction structuring innovation and business growth for many years to come. As a reflection of this optimism, I am very pleased that our management team has agreed to accept significant equity in the combined firm.”
“As alternative assets continue to gain share, we believe growth in the secondaries market should also continue to accelerate,” says Timothy Haviland, President and Managing Partner of Landmark Partners. “We are excited to enhance and expand our already strong market position as a new investment group within the broader Ares platform. Our approach and processes are culturally similar to Ares’ and we look forward to building on key sourcing, relative value and structuring advantages as well as unlocking new growth opportunities.”
The acquisition of Landmark further expands Ares’ product offering into a segment of alternative asset management that is experiencing double-digit industry growth rates. The secondary market provides sellers with the ability to achieve liquidity on their private market fund interests and enables buyers to invest later in a fund’s life, typically benefiting from seasoned portfolios and accelerated cash flows. Additionally, the secondary market’s growth has expanded over the last decade to enable fund sponsors to deliver liquidity to their investors through asset recapitalisation and GP-led secondary funds. Along with the increase in the number of compelling investment solutions Ares can offer its clients, Ares’ client base is meaningfully expanding, creating significant fundraising opportunities. The joint platform will have over 1,600 institutional investors, where less than 5 per cent of these accounts are currently invested with both Ares and Landmark.
The business combination is expected to drive meaningful investing advantages across Ares’ platform, which will expand to include five distinct but complementary investment verticals in Credit, Private Equity, Real Estate, Strategic Initiatives and now Secondaries. For Landmark, Ares’ extensive direct lending relationships with approximately 825 financial sponsors, well-established regional networks across North America, Europe, Asia Pacific and the Middle East and marketplace insights from across asset classes should serve to further differentiate its existing key competitive advantages in transaction sourcing, evaluation and structuring.
“The acquisition of Landmark is not only highly strategic, but it is also expected to be immediately financially accretive to Ares’ core earnings metrics, including after-tax realised income per common share, and it should be a meaningful driver of our growth in the years ahead,” says Michael McFerran, Chief Operating Officer and Chief Financial Officer of Ares. “In addition, the transaction is expected to be accretive to our fee related earnings margins and further enhances our fee related earnings composition within our realised income.”
The transaction is expected to close in the second quarter of 2021 and is subject to customary closing conditions, including regulatory approvals.
RBC Capital Markets, LLC and Credit Suisse Securities (USA) LLC acted as financial advisors to Ares and Kirkland & Ellis LLP served as legal counsel. Morgan Stanley & Co LLC acted as financial advisor to BrightSphere. Goldman Sachs & Co LLC acted as financial advisor to Landmark Partners LLC. Ropes & Gray served as legal counsel to both Landmark and BrightSphere.
