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Does Ares Management’s IPO Mark a New Era for Alternative Managers?

When his firm goes public this year, Ares co-founder and CEO Tony Ressler will join an elite billionaires’ club.

Tony Ressler is about to become very rich. At 53, the CEO of Los Angeles–based alternative-investment firm Ares Management is already wealthy: Ressler made $15.46 million in 2013, plus an additional $123 million in cash and equity from the management company. But when $74 billion Ares, which he co-founded in 1997, launches an IPO on the New York Stock Exchange this year, he’ll join an elite club of billionaires that includes Pete Peterson and Stephen Schwarzman, who took Blackstone Group public in 2007.

After Blackstone, fellow alternative-asset managers, including KKR and Apollo Global Management, lined up to take the plunge, but the 2008 crash killed the IPO party. Those already public, most notably Fortress Investment Group, which debuted on the NYSE in February 2007 at $35, saw their share prices collapse. Others, such as Apollo, put IPOs on hold; players like KKR and Oaktree Capital Group took a convoluted route to the public markets.

Yet despite rumblings that alternative-asset management flotations are good for principals but bad for shareholders, and questions over potential conflict between shareholders and fund investors, the IPO market has bounced back. New York–based Apollo — co-founded in 1990 by Ressler and his brother-in-law Leon Black, a former colleague from investment bank Drexel Burnham Lambert — went public in March 2011. Oaktree and Carlyle Group joined it the next year. Ares’s marks the first major IPO of a hedge fund or private equity firm since 2012, and more should follow in the coming few years. David Bonderman, co-founder of Fort Worth, Texas–based TPG Capital, has said it would consider a public offering.

“Ares joins the group of diversified managers accessing the public markets to enhance their global brand and raise the capital required to broaden their products and distribution,” says Joseph Hershberger, global head of asset management advisory with Credit Suisse in New York. Established firms like Ares also must think about succession and sharing equity with more-junior employees. Ressler and other Ares senior executives will be subject to a two-year lockup period after the IPO.

Valuations for asset managers are up. Blackstone stock is trading in the $30–$35 range, compared with an IPO price of $31. Ares is looking to raise as much as $481.3 million by offering up to 20.9 million shares at between $21 and $23 each. That would value the firm at $4.86 billion, and Ressler’s stake of roughly 23 percent at $1.1 billion. The Abu Dhabi Investment Authority, which bought a share in Ares in 2007, will reduce its interest to 12.93 percent after the IPO, from 17.08 percent. Bank of America and JPMorgan Chase are the lead advisers.

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