Ares Management LP, the alternative investment firm run by Tony Ressler, is in talks to acquire Kayne Anderson Capital Advisors, a private equity company with $29 billion in assets, according to two people with knowledge of the matter.
The firms are discussing the potential combination and haven’t finalized a deal, said the people, who asked not to be named because the talks are ongoing. The acquisition would be paid for in stock and cash, the people said.
Ares, which oversees $87 billion primarily in credit, and Kayne Anderson are headquartered a block away from each other on Los Angeles’s Avenue of the Stars. The merger, rare in the private equity industry, would accelerate Ares’s growth after the firm went public last year, and bolster its energy-related efforts.
Bill Mendel, a spokesman for Ares at Mendel Communications, and Paul Blank, a managing director at Kayne Anderson, declined to comment.
Ares President Mike Arougheti, speaking Wednesday at a conference in New York, said one reason the firm went public was to create currency to pursue strategic acquisitions. Founders of private equity firms that started in the 1980s and ’90s are aging and thinking about how their companies can continue, Arougheti has previously said, providing an opportunity for consolidation.
Blackstone Group LP, a year after selling shares to the public, acquired credit investor GSO Capital Partners in 2008 for stock and cash, adding $10 billion in assets. GSO now oversees a quarter of Blackstone’s $310 billion under management.
Kayne Anderson focuses on oil and gas operators, energy infrastructure, real estate, middle-market credit, growth private equity and distressed municipal securities. It was founded in 1984 and has expanded to 290 investment professionals in eight U.S. offices, according to its website.
The firm last month finished raising $1 billion for its fourth real estate fund and in 2013 gathered $1.6 billion for its sixth energy fund, which was oversubscribed. Kayne Anderson’s real estate strategy focuses on specialized property such as student housing.
The company is led by Chairman Richard Kayne, who goes by Ric, and Bob Sinnott, its chief executive officer. Kayne’s co- founder, billionaire John Anderson, died in 2011. The business school at University of California at Los Angeles carries his name.
Kayne, 70, would take a senior role such as co-chairman at the combined firm, which may be renamed to incorporate the Kayne Anderson brand, said the people.
Ares, founded in 1997 by former Drexel Burnham Lambert bankers Ressler and John Kissick, specializes in tradable credit, direct lending, private equity and real estate. In January it completed an acquisition of Energy Investors Funds, adding $4.6 billion in assets and 40 dealmakers to invest in energy infrastructure.
“The bar for us to make acquisitions is very, very high,” Arougheti said at the conference Wednesday. “Typically when we’ve made acquisitions, it’s coming in an area where we already have core competencies. It’s something that we understand but it’s easier for us to buy the capability than to build it organically in order to accelerate into that market opportunity.”
Ares rose 1.5 percent to $19.28 at the close of trading in New York, extending its gain this year to 12 percent.