The last twelve months in private equity (PE) have been notable for many trends, but one of the more unusual has been the number of PE firms that have themselves become publicly traded companies, including industry giants such as the Carlyle Group.
Reuters reported early on December 18 that Ares Management, who industry analysts and commentators have thought for months would be the next to take this step, have rejected the idea of an IPO, at least in the short term. Sources connected with the news industry reportedly said that while the leadership at Ares is confident they are in a strong position to become a public company and would be successful in doing do, it is not something in their immediate plans.
They added that one scenario that could see an IPO initiated in the immediate future would be if Ares themselves had an opportunity for a major acquisition and needed the capital that could be raised to use in the deal. Reuters’ source said no such moves were currently on the horizon. Nevertheless, this could be a big reason behind the confident noises coming out of Ares.
With managed assets already in excess of a reported $70billion, Ares would find themselves with a lot of leverage in negotiations were they to find themselves in a position to secure a large acquisition. Not only do they already have a lot of weight behind them, there are potentially billions of dollars more to bring to the table through an IPO, while a successful, large-scale acquisition would also give early share prices a boost.
One of the reasons PE firms have found it beneficial to go public is that it allows individuals with lower sums of money to contribute to them, whereas the funds themselves are often looking for higher net worth individuals so they can raise the sums they want to as quickly and as easily as possible.
Many of the leading banks in the U.S. have been pitching the idea of an IPO to Ares, including Morgan Stanley and JP Morgan, although they remain unsure about whether such a path would work for them, having doubled their assets over the past four years using their current model despite the global economic situation.