Morgan Stanley | sesearcs NORTH AMERICA INSIGHT ~~
Ares Management SOTP and Sensitivity Analysis
Exhibit 33: SOTP for ARES Ares Management (ARES)
Sum-of-the-Parts Components Pro Forma eumrent Downside (ase Upside Case C- (ARES) Price Price C-Corp Corp SOTP Conversion Conversion 2018e Pre-Tax Core FRE / Sh $1.12 $1.12 $1.12 0% $1.12 0% Tax Rate 24% 24% 24% 0% 24% 0% Fee Related eninge 2018e After-Tax Core FRE / Sh $0.85 $0.85 $0.85 0% $0.85 0% FRE Multiple 15:0x 18.4x 15.0x -3.4x 22.5x 4.1x Core FRE Value $12.82 $15.72 $12.82 -18% $19.23 22% + Balance Balance Sheet Net Cash and 5 6 Sheet Investments / Sh (as of 3Q17) m0ee 70.82 #062 Wh: nace Oe + Accrued Net Accrued Carry / Sh (as of $1.03 $1.03 $0.78 24% $0.78 24% Carry 3Q17) + Avg Net Carried interest / Sh 9 9 Market (2018e-2020e) $0.63 $0.63 $0.48 -24% $0.48 -24% Implied Carry ; ; Value Multiple 11.6x 11.6x LIX -3.9x 13.6x 2.0x Market Implied Carry Value [ ~ "37.26 _ $7.26! $3.65 -50% $6.47 11% Total Value $21.80 $24.70 $17.95 -27% $27.17 10% Valuation 2018e EPS $1.73 $1.73 $1.42 -18% $1.42 -18% P/E 12.6x 14.3x 12.6x -1.7x 19.1x 4.8x Source: Company Data, Morgan Stanley Research estimates Exhibit 34: Exhibit 35: ARES Estimated Potential Share Price in C-corp Conversion ARES Estimated % Change in Current Share Price Multiple on Future Performance Fees Multiple on Future Performance Fees © 7.7 9.6x 10.6x 11.6x 12.6x 13.6x 14.6x ° 7.7Xx 9.6x 10.6x 11.6x 12.6x 13.6x 14.6x = S 3 3 = s = E a a 8 8 z z o 8 8 Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates Source: Thomson Reuters, Company Data, Morgan Stanley Research estimates
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