Northstar Group is said to be close to finalising a deal with Ares Management in a potential merger that would absorb one of Southeast Asia’s oldest private equity firms into the $546 billion Wall Street giant, sources familiar with the matter told DealStreetAsia.
The talks, which DealStreetAsia first reported in January, could wrap up as soon as next month, said sources directly involved in the deal, asking not to be named as the matter is confidential.
DealStreetAsia has reached out to Northstar and Ares for comment on the merger talks.
Fund-level consolidations are often preceded by top-level departures as senior team members may face changes in compensation, reporting lines, and overall organisational structure, among other reasons.
DealStreetAsia reported on Friday that Northstar is losing its long-time co-chief investment officer, Sunata Tjiterosampurn, who has been with the group for nearly 20 years and is part of its investment committee. The long-time managing director has accepted an offer to join Danantara, Indonesia’s newly established sovereign wealth fund modelled after Singapore’s Temasek.
A former co-head of Northstar’s $140-million venture capital fund, Melvin Hade, had already left to launch a fund management company from Jakarta, DealStreetAsia reported earlier this month.
Another vice president working for the same startup fund, Michelle Irawan, is also set to exit the firm to take “some time off” from her career, sources said.
Meanwhile, Northstar’s Singapore-based former managing director, Sreejan Chaudary, had also left to launch a startup.
The two-decade-old Northstar—whose roots go back to Indonesia but is now headquartered in Singapore—is expecting more departures of its investment professionals.
The imminent merger signals a critical juncture in succession planning for Southeast Asia’s oldest private equity firms, as founding partners reassess their career paths amid the maturing of funds and assets over the past two decades.
Northstar primarily has two blind-pool fund strategies for Southeast Asia—private equity, which has five vintages; and a venture capital vehicle. The firm manages over $2.6 billion in committed capital, according to its website. GoTo, Indosat Ooredoo Hutchison and eFishery are among its notable portfolio companies.
The pressure from a tough fundraising environment, due to the ongoing exit drought, among other factors, has pushed fund managers around the world to consider mergers with global investment platforms.
Private equity firms typically launch successor funds within two to three years of closing a vehicle. After the five-year investment period, the typical 2% fee on committed capital often falls to about 0.5% and is charged only on invested capital.
If a manager does not succeed in raising the next fund to bring in new fee-paying capital, while also failing to generate distributions, the firm may be forced to implement cost cuts, reduce team size, and potentially wind down operations.
For local fund managers struggling to secure re-ups from existing LPs, attract new investors, and meet GP commitments for subsequent funds, merging with a larger group has emerged as a viable option.
Should more funds choose to merge, Southeast Asia could see fewer independent fund managers with more than three flagship funds, as the long-timers get folded into larger groups.
Los Angeles-based Ares, meanwhile, has been on a shopping spree for fund managers in Asia. In January 2020, it bought SSG Capital Holdings, known for its private debt strategy. Three years later, it bought Crescent Point Capital, a PE firm with a high exposure to China.
In March, Ares acquired GLP Capital’s business, excluding its operations in Greater China, in a $3.7 billion deal.
