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A Lucrative Stake in Robert Smith’s Vista May Soon Be for Sale

Sridhar Natarajan and Sonali Basak
·3 min read

(Bloomberg) -- Billionaire Robert Smith’s Vista Equity Partners is discussing a stake sale to reduce Dyal Capital’s lucrative ownership slice in the buyout shop.

Smith has kicked off discussions with executives at Dyal in recent weeks seeking a partial sale of their stake in his firm, according to people with knowledge of the matter. For Dyal, its holding in Vista is one of its most valuable investments, with the tech-focused private equity firm’s assets having grown five-fold since its initial purchase in 2015.

Vista could seek to offer the piece to one or more of its existing investors in its funds, the people said, asking not to be identified discussing private conversations.

The talks come as Vista seeks to turn the page on a tumultuous 2020 with its founder Smith admitting to evading taxes and a management shakeup. Dyal, meanwhile, is locked in a tussle with some other investment firms, grappling with the fallout from its December announcement to merge with private-credit power player Owl Rock.

The two sides have not yet formalized an agreement and the buyout firm could also initially elect to repurchase some of the stake from Dyal, one of the people said.

Representatives for Dyal and Vista declined to comment.

In October, federal prosecutors said Smith concealed income and evaded taxes for 15 years by using foreign trusts, corporations and bank accounts to cheat the Internal Revenue Service. Smith agreed to pay more than $139 million in back taxes, interest and penalties and avoided prosecution by cooperating in a case against businessman Robert Brockman. Vista also faced the fractious exit of its co-founder Brian Sheth.

Legal Battle

Dyal, a unit of Neuberger Berman, is dealing with its own legal battle after Sixth Street Partners asked a judge to put its merger with Owl Rock on hold, arguing that it had power to kill the deal. The deal with Owl Rock would transform Dyal from a passive investor buying up stakes in investment firms to forming a new investing behemoth that could be in direct competition with some of the same firms it invests in through its funds.

Dyal, which is run by former Lehman Brothers colleagues Michael Rees and Sean Ward, has led the charge in creating investment funds to exclusively acquire stakes in alternative investment firms. It first bought a piece of Vista in 2015 and raised its stake two years later. The investments in two roughly equal tranches boosted Dyal’s stake to 28%, according to a consulting firm report.

Vista’s 2015 deal helped popularize sales of minority stakes, upending the conventional wisdom that only weaker businesses would sell a piece of themselves and at a time when more money than ever was pouring into private equity.

The Dyal deal helped Vista boost its fund offerings without going public. At the time of its second investment in 2017, Vista was valued at about $7 billion, according to Axios. Vista, which was founded in 2000, now oversees more than $73 billion in assets, making it one of the world’s largest buyout firms.

It’s also vaulted Smith, 58, to the league of America’s wealthiest with a fortune in excess of $7 billion, according to the Bloomberg Billionaires Index.

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