This spring, Robert F. Smith, the richest African-American within the US, landed within the highlight because the NFL urged him to purchase the Denver Broncos to assist the league address a racial-equity crisis.
Now, having lost a contest to purchase the team to Walmart heir Rob Walton, the 59-year-old billionaire is grappling with a crisis of his own as he struggles to boost a latest flagship technology fund for his buyout firm Vista Equity Partners, The Post has learned.
The issue: Vista appears to be having trouble attracting investors not only due to recent turmoil within the tech sector, but additionally due to upheaval on the fund after Smith — whose fortune is estimated by Forbes at $6.7 billion — became embroiled in a tax-evasion scandal in late 2020.
Smith — who’s the chairman of Carnegie Hall and who famously shelled out $34 million in 2019 to repay the coed loans of the complete graduating class of Morehouse College — avoided federal prosecution over evading taxes on a whole bunch of hundreds of thousands of dollars in investment profits by cooperating as a witness against Robert Brockman, a Vista seed investor who was criminally indicted in 2020 in a record-breaking $2 billion tax fraud case.
Nevertheless, insiders say the scandal continues to haunt Vista. Co-founder and ex-president Brian Sheth — a respected rainmaker whose deal-hunting prowess was credited for much of the firm’s early success — reportedly exited after Smith refused handy over the reins even temporarily as he negotiated with the Department of Justice within the tax case. On the time, Sheth said his departure was unrelated to Smith’s “personal matter.”
Former Vista president Brian Sheth left the corporate after Smith refused handy over the reins as he dealt along with his tax case.Bloomberg via Getty Images
Recently, signs have emerged that investors could also be growing skittish over Smith flying the firm solo. In October, Vista reportedly launched an effort to boost a latest buyout fund value between $20 billion and $24 billion — eclipsing the $17 billion it raised for its most up-to-date flagship fund in 2019 — on the time the largest tech-focused buyout fund ever.
Vista had targeted its latest flagship to attain a “first close” in April, in line with the Wall Street Journal, meaning that an initial trove of money could be available for investing. But Vista has received only $9.4 billion in commitments thus far, and it’s not clear whether the firm has begun deploying it, sources near the situation told The Post.
A spokesperson for Vista declined to comment for this text.
Latest York state’s pension fund in May invested just $400 million in Vista’s latest fund after committing $500 million to the smaller 2019 fund, in line with public filings. The Oregon Public Employees Retirement System revealed in a March filing it has committed only $250 million to Vista’s latest fund after investing $500 million in 2019.
Some government pensions have a policy of not investing with those that have defrauded the federal government, a Vista investor said, adding that his pension has not yet made up its mind.
Smith elected to not make a proper bid for the Broncos after some Vista investors expressed concern it will be an excessive amount of of a distraction while he manages the firm.Getty Images
It’s an especially sore point on condition that Vista’s archrival — the tech-focused buyout fund Thoma Bravo — in May closed on a $20 billion-plus fund after being out there for in regards to the same period of time. That’s after Thoma Bravo outshone Vista’s 2019 fund with its own $17.8 billion fund.
The shortfall comes as Smith for the primary time is running Vista without Sheth. As investors gauge the importance of that, some indicate that Vista has used a formula for its acquisition targets, almost all the time enterprise software firms, that features acquiring rival firms in the identical space and mixing them to slash costs while gaining market clout.
“Do they need Sheth to oversee the strategy of running firms? I don’t think so,” a current Vista investor said. “I believe where he might be handy is in pricing the deals.”
One possible living proof: Vista on Jan. 31 partnered with Elliott Management to purchase software giant Citrix for $16.5 billion, or $104 per share. An historic rout of tech shares has since followed, with insiders estimating Citrix’s value has been halved. Nevertheless, Citrix is trading at greater than $98 a share because the market believes the $104 deal will close in the subsequent few months owing to a tightly written merger agreement.
Smith lost out on the Broncos to Walmart heir Rob Walton.AP
The banks who agreed to finance the deal stand to lose $1 billion after they resell Citrix’s debt for much lower than par, an advisor to non-public equity firms said of the Citrix deal.
“That is the largest bust of the 12 months,” the advisor said.
To match, Elon Musk has suggested he could walk away from his agreement to purchase Twitter for $54.20 a share, yet the social network’s shares are trading at just $38. The difference: Vista is within the business of shopping for firms and if Smith breaks a merger agreement on what’s seen as a flimsy excuse it will make it very hard for him to win the trust of other sellers.
Smith elected to not make a proper bid for the Denver Broncos after some Vista investors expressed concern it will be an excessive amount of of a distraction while he manages the firm, sources said.
Despite the setbacks, insiders say Smith appears to be focused on the longer term at Vista — and that he appears to be pondering more about offense than defense.
As recently as just a few weeks ago, Vista was seeking to make the most of the tech market dislocation and acquire software firms trading near 52-week lows, a source with direct knowledge of the situation said. Vista has been doing so by sending opportunistic letters intended to place pressure on an organization to sell, in line with a source near the situation.
“Vista calls CEOs to see in the event that they are excited by selling, the CEOs say no after which they write letters to directors forcing board meetings,” the source said.