Private equity and debt giant Ares Management and fellow Century City finance firm Kayne Anderson Capital Advisors announced Tuesday that they have mutually agreed to forgo their plans to merge due to a difference of opinion about how to navigate the current bear market in energy.

Ares announced in July that it would acquire Kayne Anderson for $2.6 billion. The merger would have made the combined company one of the five biggest asset managers in Los Angeles.

However, now both companies say disagreements about how to handle “the current market conditions in the energy sector” have given them pause. Kayne specializes in energy investments while Ares’ core business is focused on private equity, direct lending and tradable credit.

A Kayne spokesman declined to comment, and an Ares spokesman did not immediately respond to the Business Journal’s request.

The two companies still plan to collaborate, with Ares – along with some of its principals and affiliates – now planning to invest $150 million in Kayne.

“While we continue to strongly believe in Kayne and the long-term energy investment opportunity, it became clear this was not the right time to bring together our cultures and business models into a merged public company,” Ares Chief Executive Tony Ressler said in a statement from both companies announcing the cancellation of the merger. “I look forward to investing with Kayne and am pleased we are finding alternative means to benefit from our complementary strategies and networks.”

Ares and Kayne Anderson are also looking for other ways to work together in the near future, both companies said in the statement.

“We have long prided ourselves on being opportunistic at times of market dislocations because it is times like these that often deliver the highest returns to investors,” Kayne Anderson Chairman Richard Kayne said in the statement. “In my view, what is currently happening in energy is presenting us with one of the more opportunity-laden times.”

Ressler and Kayne both appeared on the Business Journal’s most recent list of Wealthiest Angelenos. Ressler ranked No. 35 with an estimated net worth of $1.6 billion. Kayne, who founded Kayne Anderson with early investor and late business magnate John Anderson, placed No. 49 with $1.2 billion in assets.