GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

4. GOODWILL AND INTANGIBLE ASSETS

Intangible Assets, Net

The following table summarizes the carrying value, net of accumulated amortization, of the Company's intangible assets:



	Weighted Average Amortization Period as of September 30, 2022 In Years	As of September 30,		As of December 31,
		2022		2021
Management contracts	5.2	$	586,077	$	641,737
Client relationships	9.9	262,301		229,501
Trade name	7.8	11,079		11,079
Other	2.1	500		500
Finite-lived intangible assets		859,957		882,817
Foreign currency translation		(2,972)		1,792
Total finite-lived intangible assets		856,985		884,609
Less: accumulated amortization		(186,677)		(115,791)
Finite-lived intangible assets, net		670,308		768,818
Management contracts		567,800		567,800
Trade name		—		86,200
Indefinite-lived intangible assets		567,800		654,000
Intangible assets, net		$	1,238,108	$	1,422,818

In connection with the Infrastructure Debt Acquisition, the Company allocated $68.7 million and $32.8 million of the purchase price to the fair value of the acquired management contracts and client relationships, respectively. The acquired management contracts and client relationships had a weighted average amortization period from the date of acquisition of 5.2 years and 8.4 years, respectively.

During the three months ended September 30, 2022, the Company decided to rebrand its secondaries group as Ares Secondaries and to discontinue the ongoing use of the Landmark trade name. As a result, the Company recorded an impairment charge equal to the Landmark trade name’s carrying value of $86.2 million.

Separately, in connection with lower than expected fundraising for an acquired Landmark private equity secondaries fund, the Company recorded a non-cash impairment charge of $88.4 million to the fair value of a management contract during the three months ended September 30, 2022. The primary indicator of impairment was lower fee paying assets under management from the acquired Landmark private equity secondaries fund. Also connected to the lower fundraising projections associated with the acquired Landmark private equity secondaries fund, the Company reversed all previously recorded expenses associated with the Landmark management incentive plan. See “Note 9. Commitments and Contingencies” for further discussion. In addition, the Company recorded non-cash impairment charges of $3.7 million, $3.1 million, and $0.2 million to the fair value of management contracts acquired in connection with the Landmark Acquisition, the Black Creek Acquisition and the SSG Acquisition, respectively. The primary indicator of impairment was the shorter expected lives of certain funds as a result of returning capital to fund investors sooner than initially planned. The impairment charges for the intangible assets acquired in connection with the Landmark Acquisition, the Black Creek Acquisition and the SSG Acquisition are included within the Secondaries Group, the Real Assets Group and Strategic Initiatives, respectively.

The Company expects lower future cash flows to be generated by these management contracts over the remaining useful lives of the funds. The Company determined that the carrying value of the intangible assets exceeded the expected undiscounted future cash flows and recorded impairment charges equal to the difference between its carrying value of each asset and the asset’s estimated fair value, which was calculated using a discounted cash flow methodology.

The non-cash impairment charges represents an acceleration of amortization expense and totaled $181.6 million for the three and nine months ended September 30, 2022. Amortization expense associated with intangible assets, excluding the accelerated amortization from the non-cash impairment charges described above, was $32.7 million and $32.8 million for the three months ended September 30, 2022 and 2021, respectively, and $101.5 million and $60.7 million for the nine months ended September 30, 2022 and 2021, respectively. Amortization expense is presented within general, administrative and other

expenses in the Condensed Consolidated Statements of Operations. During the nine months ended September 30, 2022, the Company removed $210.6 million of impaired and fully amortized intangible assets.

Goodwill

The following table summarizes the carrying value of the Company’s goodwill:


	Credit Group		Private Equity Group		Real Assets Group		Secondaries Group		Strategic Initiatives		Total



Balance as of December 31, 2021	$	32,196	$	58,600	$	53,339	$	417,738	$	226,099	$	787,972
Acquisitions	—		—		213,424		(96)		—		213,328
Reallocation	—		(10,530)		10,530		—		—		—
Foreign currency translation	—		—		—		(35)		(4,525)		(4,560)
Balance as of September 30, 2022	$	32,196	$	48,070	$	277,293	$	417,607	$	221,574	$	996,740

In connection with the Infrastructure Debt Acquisition, the Company allocated $213.4 million of the purchase price to goodwill.

In connection with the establishment of the Real Assets Group described in “Note 15. Segment Reporting,” the Company had an associated change in its reporting units and reallocated goodwill of $10.5 million from the Private Equity Group to the Real Assets Group using a relative fair value allocation approach. The former Real Estate Group has been transferred in its entirety to the Real Assets Group and the total goodwill of $53.3 million has been reallocated from the former Real Estate Group to the Real Assets Group accordingly.

There was no impairment of goodwill recorded during the nine months ended September 30, 2022 and 2021. The impact of foreign currency translation is reflected within other comprehensive income (loss).