Ares Capital Corporation's assets under management will surpass $31 billion following the completion of a merger between two business development companies.
Summary: Ares Capital Corporation will acquire the $2.5 billion MidCap Financial Investment Corporation (MFIC) from Apollo Global Management.
According to people familiar with the matter, a fund managed by Ares Management, a leading institution in private credit, will acquire the $2.5 billion fund from its major competitor and former incubation parent, Apollo Global Management.
Deal Details
Sources say Ares will acquire the publicly traded business development company MidCap Financial Investment Corp (MFIC) through its publicly listed fund, Ares Capital (ARCC), using a combination of cash and stock.
If the deal closes as planned in the first half of 2027, existing MFIC shareholders will ultimately hold approximately 5% of the combined fund.
Amid rising concerns over default risk that triggered a sell-off in private credit funds held by individual investors, Apollo put this underperforming fund up for auction earlier this year.
The fund holds various loans originated by MidCap Financial; MidCap Financial itself is a much larger corporate lending operation that Apollo will retain and not sell along with the fund.
According to data from closed-end fund advisory firm CEF Advisors, MFIC has delivered mediocre performance for years, with its share price falling sharply to a discount of nearly 40% relative to the net asset value of the fund's loan assets as assessed by Apollo.
Ares Capital (ARCC) currently manages approximately $29 billion, making it one of the largest private credit funds globally.
MFIC's poor performance has given Ares the opportunity to acquire these loan assets at a low price.
Following the completion of this transaction, the total investment scale of the Ares fund will exceed $31 billion; the portfolio will add 200 new borrowing entities, further enhancing asset diversification.
Industry Background
The origins of the two asset management institutions can be traced back to 1997, when Ares spun off from Apollo.
Since then, both institutions have expanded significantly: Apollo manages approximately $1 trillion, while Ares manages approximately $670 billion, but their investment strategies have diverged.
Ares is one of the earliest fund managers to focus on corporate private lending, and apart from expanding into private asset-backed bond business, it has remained committed to this core sector.
Apollo started as a private equity firm, then established credit funds to trade public bonds; it later aggressively expanded its private credit business through its insurance subsidiary Athene, a model that has been widely discussed in the market.
Apollo currently primarily underwrites investment-grade private debt projects for Athene and other insurance institutions, while beginning to divest its smaller listed funds.
In January of this year, the institution completed a restructuring of another underperforming real estate investment trust, transferring $9 billion in commercial real estate mortgage loans to its own insurance subsidiary Athene.
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