Key Stats for Ares Stock
- Current Price: $141.25
- Target Price (Mid): ~$260
- Street Target: ~$147
- Potential Total Return: ~84%
- Annualized IRR: ~15% / year
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What Happened?
Ares Management Corporation (ARES) has built a $671 billion empire in almost everything except the one business that defines its biggest rivals. Private equity is roughly 4% of its assets, a rounding error next to the franchises at Blackstone, KKR, and Apollo. In late July, the Financial Times reported that Ares had held talks to acquire Leonard Green & Partners, a roughly $85 billion Los Angeles buyout firm, a deal that would quadruple the size of its private equity arm overnight.
The Leonard Green discussions are preliminary, reported talks that both firms declined to comment on, and they may not lead to an agreement. But the report crystallizes the question hanging over Ares since CEO Michael Arougheti began signaling in late 2025 that he wanted to get much bigger in private equity: how badly does Ares want this, and can it pay for it. The credit machine that made the firm famous is still compounding, which is exactly what makes an expensive diversification affordable.
The Hole in the Middle of a $671 Billion Platform
Ares grew up as a credit house, and it shows. More than 65% of its assets sit in credit, and the private equity group manages only about $25 billion. That is not a performance problem: on the second quarter call, Arougheti noted the firm’s sixth flagship private equity fund is a top-quartile performer, generating close to 20% since inception. The problem is scale. When Ares’ largest institutional clients consolidate relationships toward fewer managers, a subscale franchise risks watching that private equity capital walk to a competitor.
The two Los Angeles firms have co-invested before, including in the healthcare business Press Ganey. A full acquisition would roughly quadruple Ares’ private equity business and hand it deep relationships in consumer, healthcare, and services, sectors where Ares has been underweight. It would also fit an industry pattern: consolidation among private capital managers has run at record levels, with fewer but larger deals concentrating assets in a handful of scaled platforms as limited partners funnel money into proven hands.
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What Management Said About Buying Its Way In
Arougheti would not comment on rumors, but he laid out the framework Ares applies to a deal like this. Asked about inorganic private equity growth by Goldman Sachs analyst Alexander Blostein, he said any target must clear four tests: culturally accretive, strategically accretive, capable of being improved through revenue synergies, and financially accretive. He has also signaled publicly that a large private equity acquisition would be well within the firm’s financial reach, given its market value. On the Q2 call, he flagged the catch directly, noting that for large buyout franchises, “the growth profile of these businesses is less linear and more episodic than some of the core businesses.” That is the trade: real diversification, but lumpier earnings imported into a company the market prizes for steady, fee-related growth. The same framework turned the Landmark and Black Creek deals into growth engines, so the track record earns some benefit of the doubt.
Fee-related earnings rose 20% year over year in the second quarter to about $491 million, management fees topped $1 billion, and Pathfinder III, the firm’s asset-based finance fund, closed in a single first-and-final raise at roughly $8.5 billion, well above its $6.5 billion target. Redemption pressure in the nontraded BDC that spooked investors earlier this year is also easing, with the Asia-concentrated redemption queue cut from about $1.2 billion to roughly $600 million.
The stock trades at about 19.8x forward EV/EBITDA, well above the roughly 8.9x median across its capital markets peer set, with BlackRock at 12.4x, T. Rowe Price at 6.8x, and Franklin Resources at 7.9x. That premium rests on Ares compounding fee-related earnings faster and more predictably than the group. A large acquisition tests it from both sides, adding growth while adding earnings volatility, so the burden is on Ares to prove a bigger franchise still compounds as the one investors fell in love with.
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TIKR Advanced Model Analysis
- Current Price: $141.25
- Target Price (Mid): ~$260
- Potential Total Return: ~84%
- Annualized IRR: ~15% / year
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Two drivers carry the revenue line. The first is the wall of assets already contracted but not yet earning fees: about $114 billion, which management estimates could generate roughly $828 million in incremental annual management fees as it deploys. The second is continued double-digit fundraising across credit, infrastructure, and wealth, where Ares ranked second in the channel over the trailing year. The margin driver is operating leverage, with a year-to-date fee-related earnings margin near 42% that management expects to push toward the top of guidance. The primary risk is the private credit cycle: a genuine turn in nonaccruals, running near 2% today, would hit both the credit book and sentiment across the platform.
The upside is a firm that keeps compounding fee-related earnings in the high teens while adding a scaled private equity franchise. The downside is a lumpy, expensive acquisition that dilutes shareholders and imports earnings volatility into a stock priced for consistency.
Conclusion
The next real signal is confirmation, or denial, of a private equity acquisition in the coming quarters. A deal that clears Arougheti’s four tests at a disciplined price would validate the strategy; an expensive, heavily dilutive one, or a bidding war lost to a rival, would not. Until then, the third quarter print expected in early November carries its own checkpoint: fee-related earnings growth holding in the high teens and the $114 billion backlog still converting into fees. Hold those two lines, and the compounding thesis is intact, with or without Leonard Green.
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Should You Invest in Ares?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!