A subsidiary of Ares Management entered into a definitive agreement with a subsidiary of BrightSphere Investment Group and Landmark Investment Holdings to acquire 100% of Landmark Partners, (collectively, Landmark), an investor in acquiring secondary private fund ownership stakes in the alternative asset management industry. The transaction is valued at $1.08 billion, including approximately $787 million in cash and approximately $293 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 totaling $18.7 billion in assets under management as of Dec. 31, 2020. Supported by an institutional investor base of more than 600 fund investors, Landmark develops transaction solutions for a roster of financial sponsors and institutional investors. Landmark was founded in 1989 and has recorded a compound annual growth rate of 17% 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,” Michael Arougheti, CEO and president of Ares, said. “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,” Borges, who is chairman and a managing partner of Landmark Partners, said. “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,” Haviland, who is president and a managing partner of Landmark Partners, said. “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 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 recapitalization and GP-led secondary funds. The joint platform this transaction will create will have more than 1,600 institutional investors, with fewer than 5% of the accounts currently invested with both Ares and Landmark.
The business combination will expand Ares’ platform, which will now include five investment verticals, including its already existing credit, private equity, real estate and strategic initiatives verticals, with secondaries added as the fifth vertical through this transaction.
“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 realized income per common share, and it should be a meaningful driver of our growth in the years ahead,” Michael McFerran, COO and CFO of Ares, said. “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 realized income.”
The transaction is expected to close in Q2/21 and is subject to customary closing conditions, including regulatory approvals.
RBC Capital Markets and Credit Suisse Securities acted as financial advisors to Ares and Kirkland & Ellis served as legal counsel. Morgan Stanley acted as financial advisor to BrightSphere. Goldman Sachs acted as financial advisor to Landmark Partners. Ropes & Gray served as legal counsel to both Landmark and BrightSphere.
