LOS ANGELES—The merger between Ares Management and Kayne Anderson Capital Advisors, which would have resulted in one of the world's largest alternative asset managers with more than $110 billion under management, is off. The two companies said Tuesday they had mutually agreed to terminate the definitive merger agreement that was reached in July.

The current volatile state of the energy market proved to be the deal-breaker, with Ares and Kayne holding “different views” on how to proceed with the business combination as a result, the two companies say in a statement. “After thoughtful discussions, both sides decided it was best not to pursue the transaction at this time.”

As part of the agreement to terminate the merger, Ares will invest $150 million into Kayne's energy activities, which include energy private equity, private energy income and energy infrastructure marketable securities funds managed by Kayne. Both companies, which are headquartered within a block of one another in Los Angeles, will seek out “additional collaborative marketing opportunities,” including jointly managing separately managed accounts and other products, according to the statement.