In a landmark transaction, Ares Management Corp. has acquired a 70% stake in an Omni Bridgeway litigation finance fund for approximately A$320 million. This deal represents one of the largest secondary market transactions within the litigation funding sector and marks Ares' inaugural investment in litigation finance through its Asian special situation strategy. The newly established Omni Bridgeway Continuation Fund 9 encapsulates co-investment interests across over 150 legal assets managed by Omni Bridgeway. This acquisition highlights the growing interest and potential in diversified legal asset portfolios, as well as the innovative approach to providing liquidity and investor access.
This collaboration between Ares Management and Omni Bridgeway showcases the appeal of litigation finance as an alternative investment class. Ares paid more than three times the initial Omni Bridgeway investment, underscoring the value placed on well-managed and diversified legal assets. Raymond van Hulst, CEO of Omni Bridgeway, emphasized the significance of this deal in demonstrating the availability of substantial capital pools willing to invest in high-quality legal portfolios. Furthermore, this marks the first instance of a continuation fund in the industry, allowing sponsors to retain ownership while offering liquidity options to investors.
The new fund predominantly consists of individual cases from Omni Bridgeway's previous funds, excluding law firm or corporate portfolios. These cases span various legal domains, such as intellectual property, arbitration, and contract disputes, and are evenly distributed across regions including the US, Asia Pacific, and Europe, the Middle East, and Africa. Jan-Paul Kobarg, leading the deal for Ares, highlighted the necessity of scale and sizable transactions to justify the investment bandwidth. He noted that Omni Bridgeway stood out due to its scale and breadth of portfolio offerings.
Due diligence for this transaction commenced in early 2024, involving a comprehensive six-month review with assistance from Clifford Chance lawyers. The process entailed analyzing financial outcomes of over 400 completed cases, evaluating Omni Bridgeway's valuations, and assessing the company holistically. This diligence was crucial not only for Ares but also for Omni Bridgeway, which sought to validate its valuation system against independent third-party assessments. Van Hulst expressed his preference for financing growth through equity rather than debt, aligning the capital structure with the asset risks.
Litigation finance presents an opportunity for Ares to engage in high-return deals uncorrelated with broader market movements. As global market volatility increases, particularly due to tariff wars, breach of contract suits are anticipated to rise, driving demand for external funding. This strategic investment positions Ares to benefit from the unique risk profile of litigation finance, offering returns based solely on case outcomes rather than market fluctuations.