We believe it pays to be first—especially when you have a blueprint from which you can build.

“Ares started its European Direct Lending Business in 2007, when there was a limited European direct lending market,” said Blair Jacobson, Partner and Co-President of Ares Management Corporation. But they had a knowledge base to build upon. “Ares had a really good, successful blueprint that they used United States. They brought it over to Europe and really strongly believed that that it could work.”

At the time, the business was dominated by commercial banks. Then, in 2008, the Global Financial Crisis hit. “That changed the banking market forever,” Jacobson said. “Not only did banks retrench and go out of business, but banks that survived became more highly regulated,” said Jacobson, reflecting on the direct lending landscape in Europe.

As in the United States, the regulatory environment that emerged in Europe affected how banks were able to lend to businesses. However, for Ares it was a tremendous opportunity. “Writing these types of loans and investments that we would do in direct lending became less attractive for banks and more attractive for firms like Ares,” he said.

The market really started to take off in 2012–2013, once businesses began to recover. “Ares already had a five- or six-year head start, which really helped us succeed in the market,” said Jacobson. The firm was, as the saying goes, in the right place at the right time, and had already cultivated relationships on the continent that gave it an advantage over new entrants.