Ares Management: EPS of $1.129 — Strong Fundraising and Origination Make for a Good Quarter

研报英文原文证据摘录

Ares Management: EPS of $1.129 — Strong Fundraising and Origination Make for a Good Quarter

d with the impact of a meaningful

deterioration in credit quality in Ares’s investment portfolio. Ares has meaningful credit

exposure. Should credit quality deteriorate or the asset class fall out of favor, we see the

potential for weaker returns and weaker sales, driving both lower earnings and lower

valuations on those lower earnings. The software segment has become a particular area of

focus industry-wide on the back of AI disintermediation concerns.

Investor commitments could disappoint. We base our thesis and valuation in part on

Ares’s ability to generate strong asset growth over the next two years. Should fundraising

fall flat, the stock could suffer. We note the wealth channel has been particularly more

volatile as of late.

Integration risk associated with M&A. On October 8, 2024, Ares announced the

acquisition of $44bn real assets centric manager GCP for an initial total consideration of

$3.7bn, with an additional $1.5bn earn out possible over time (closed on March 1, 2025).

While our initial views of the transaction werepositive and management outlined

expectations that it will be accretive to ANI/sh over the first four quarters post closing

(which our model projects as well), we note that integration risk always exists with M&A.

We also note that while Ares has completed a number of M&A transactions in recent years,

such as Black Creek Group and Landmark Partners (both in 2021), the GCP acquisition is

quite a bit larger than each of these precedents, both in terms of AUM acquired and

compensation provided to the sellers. We also note that it came at a more expensive forward

FRE multiple of 17.5x, as compared with 5.4x for Black Creek and 10.1x for Landmark