NYSE-listed alternative investment manager Ares Management Corporation is expanding its reach in Asia through the acquisition of a controlling interest in Hong Kong-based SSG Capital Management, according to a company announcement.
The US alternative asset manager has agreed to buy the stake in the distressed asset specialist through a subsidiary for an undisclosed amount, giving Ares a springboard into Asia’s credit and special situations investment market.
The acquisition comes just under two months after SSG held a $2.7 billion final close on its fifth Asia Pacific-focused special situations and distressed assets fund, according to a report in Private Debt Investor.
Expanding Global Reach
“We believe SSG is the ideal partner for Ares to further expand into the strategically important Asian region,” said Michael Arougheti, chief executive officer and president of Ares. “SSG is an experienced alternative investment manager with a long-tenured team with deep investment experience, well-established track record, comprehensive regional sourcing networks and global institutional investor relationships.”
Established in 2009 by a group of former Lehman Brothers executives including current managing partner and chief investment officer Edwin Wong and chairman Shyam Maheshwari, the firm has grown to a team of 40 professionals spread across the region with offices in nine locations including Hong Kong, Shanghai and Mumbai.
Los Angeles-based Ares, which has $144 billion in global assets under management across credit, private equity and real estate strategies, says that it will use SSG’s Asian presence to enhance its global reach.
“This transaction significantly builds upon our established Asian presence and will serve as a foundation for our future expansion,” said Eric Vimont, partner of Ares.
At present, only 14 percent of Ares’ directly held assets under management are located in Asia and Australia, with the bulk in North America and Europe. SSG currently has $3.9 billion in dry powder and $6.2 billion in assets under management across India, Indonesia, China and Thailand.
Deal Includes Multi-Year Lock-Up
In a statement announcing the acquisition, Ares said that the transaction consideration will be mainly in the form of Ares Class A common shares subject to a multi-year lock-up, along with a cash component. The transaction is expected to close in the second or third quarter of 2020 subject to customary conditions.
The terms of the acquisition also allow the US firm to take full ownership of SSG under certain conditions which were not disclosed. SSG declined to comment on the specifics of the transaction, while Ares had not responded to an enquiry from Mingtiandi at the time of publication.
Filling a Need for Non-Bank Lenders
Ares highlighted in an investor presentation that SSG follows an investment approach which aligns closely with that of the California-based company, comprising flexible investment structuring with a strong focus on limiting downside risk.
The investor presentation also noted that Asia’s fast growth has led to structural inefficiencies in a concentrated banking sector that is expected to drive capital needs for an underserved middle market, creating opportunities for non-bank lenders.
“We look forward to leveraging the SSG team’s experience and infrastructure to enhance our current activities, launch new strategies and continue to deliver attractive long-term returns,” said Vimont in a statement.
Successful Fund Raise Precedes Takeover
Ares is buying a controlling stake in SSG seven weeks after the Hong Kong-based firm closed SSG Capital Partners V fund at $1.9 billion in equity in addition to a sidecar of $825 million — surpassing its original target by over $400 million.
Drawing commitments from a range of institutional investors, the vehicle is targeting special situations and distressed investments across India, China and Southeast Asia. The fund also seeks to allocate between 15 and 20 percent of its capital to opportunities in South Korea, Australia and other countries in Asia, according to industry publication Private Equity News.
The New York State Common Retirement Fund revealed last week that it had completed a $200 million investment in the fund, while previous official statements have revealed that the Pennsylvania Public School Employees Retirement System committed $300 million and the Virginia Retirement System chipped in a further $150 million.