Larger firms snap up Asia-based special situations GPs

SSG is the latest addition to the special situations managers that larger Western firms want to acquire to leverage on established local businesses in Asia.

Ares Management, a Los Angeles-headquartered alternative asset manager, made headlines this week with its acquisition of a majority stake in SSG Capital Management, a Hong Kong-headquartered private credit and special situations manager.

As Private Debt Investor reported on Tuesday, Ares acquired SSG in a stock-and-cash transaction, the firms said in a statement. Under special circumstances, Ares may acquire full ownership of SSG, subject to discussions among the interested parties. The transaction is to be finalised in the second or third quarter of 2020 and is subject to customary closing conditions, including regulatory approvals.

Eric Vimont, partner and chief operating officer at Ares Asia noted in the statement that “the [Asia-Pacific] region is the largest and fastest growing global market that we believe is characterised by structural market inefficiencies that are driving the capital needs for the underserved middle market”.

Kirkland & Ellis advised Ares on the transaction, the law firm’s statement showed. It added that SSG managed private credit and special situations funds totalling about $6.2 billion in AUM, as of 30 September 2019.

Commenting on the deal, a source familiar with the matter who wished not to be named told PDI: “My assessment would simply be the consolidation of the asset management world is an ongoing phenomenon globally and Asia makes sense for larger Western firms to consider buying versus build.”

SSG is not the first pan-Asian credit manager that has been in talks with larger financial institutions from the West.

In 2018, Fiera Capital, a Montreal-headquartered independent investment management firm, acquired Clearwater Capital Partners, a Hong Kong-headquartered private equity and credit investment company.

As PDI reported, Fiera Capital, the acquirer of Clearwater Capital, agreed a share purchase sized at $21 million as of 1 March 2018, subject to various adjustments, according to Daniel Richard, a senior vice-president of corporate communications and investor relations at Fiera Capital.

He added that Fiera Capital would pay $12 million to Clearwater in cash and issue $9 million in Fiera Capital Class A subordinate voting shares.

In August 2018, Fiera Capital completed its acquisition from affiliates of Clearwater’s founders, Robert Petty and Amit Gupta, for a total consideration of up to $65 million, according to a statement from Fiera’s legal advisor, Sullivan & Cromwell. Clearwater managed about $1.4 billion of AUM at the time of the acquisition in 2018, the law firm’s statement showed.

It is understood that Fiera Capital agreed to enter an earnout provision with Clearwater Capital, which is a contractual clause for a business seller – in this case, Clearwater Capital – to obtain additional compensation if the business achieves certain financial goals.

James Dilley, a Hong Kong-based partner in PwC’s deals group, told PDI that more Western credit managers are looking to build, or buy, pan-Asian investment capabilities.

“This is a due to their LPs looking to award mandates to those who can provide holistic global credit solutions,” he noted. He added that, for independent Asian managers, these types of transactions can help to further institutionalise existing fundraising capabilities and give the founders more clarity over a longer-term succession plan.

Another industry source added that Ares’ acquisition of a majority stake in SSG is “great for Asia’s private debt market”.

Further details on the financial terms of the transaction could not be disclosed.

PDI’s requests for comments to spokespeople at SSG Capital were not returned by publication time.