Sunday, August 7, 2022

Robert F. Smith still plagued by tax scandal after losing Denver Broncos race: Sources

This spring, Robert F. Smith, the richest African-American in America, hit the headlines as the NFL urged him to buy the Denver Broncos to help the league address the racial-equity crisis.

Now, after losing the team buying competition to Walmart heir Rob Walton, the 59-year-old billionaire is grappling with his own woes as he struggles to raise a new flagship technology fund for his buyout firm Vista Equity Partners. Post learned.

The problem: Vista is having trouble attracting investors not only because of the recent turmoil in the tech sector, but also because of the turmoil in the post-Smith fund – whose fortune is estimated at $6.7 billion by Forbes – Is embroiled in tax-evasion scam at the end of 2020.

Smith — who is the chairman of Carnegie Hall and who in 2019 paid $34 million to pay off student loans for Morehouse College’s entire graduating class — avoided federal prosecution to avoid taxes on hundreds of millions of dollars in investment gains by collaborating. Saved. 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.

Still, insiders say the scam is plaguing Vista. Co-founder and former chairman Brian Sheth – a respected rainmaker whose deal-hunting prowess was credited for the firm’s early success – reportedly refused to hand over the reins to Smith even temporarily after he exited. He had talks with the Justice Department. tax matter. At the time, Seth said his departure was unrelated to Smith’s “private matter.”

Former Vista president Brian Sheth left the company after Smith refused to hand over the reins to deal with his tax case.
Bloomberg via Getty Images

More recently, there have been signs that there may be growing investor resentment over Smith flying the firm alone. In October, Vista reportedly launched a new buyout fund-raising effort of between $20 billion and $24 billion — eclipsing the $17 billion it raised for its most recent flagship fund in 2019 — the largest at the time. Large tech-focused buyout fund.

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According to the Wall Street Journal, Vista was aiming to achieve a “first close” to its latest flagship in April, meaning an initial fund of cash would be available for investment. But Vista has only received $9.4 billion in commitments so far, and it’s unclear whether the firm has started to deploy it, sources close to the situation told The Post.

A Vista spokesperson declined to comment for this article.

In May the New York State Pension Fund just invested $400 million in Vista’s new fund after giving $500 million to the smaller fund in 2019, according to a public filing. The Oregon Public Employees Retirement System disclosed in a March filing that it has only invested $250 million in Vista’s new fund after investing $500 million in 2019.

Some government pensions have a policy of not investing with those who have cheated the government, a Vista investor said, adding that their pensions have not made up their mind yet.

Robert F. Smith
Smith decided not to make a formal bid for the Broncos after some Vista investors expressed concerns it would be too much of a distraction when he manages the firm.
Getty Images

It’s a particularly sad point given that the arrival of Vista — tech-focused buyout fund Thoma Bravo — closed in May on a more than $20 billion fund after being on the market for roughly the same amount of time. Then Thoma Bravo overtook Vista’s 2019 fund with his $17.8 billion fund.

The drawback comes when Smith is running Vista without Sheth for the first time. As investors understand its importance, some say Vista has used a formula for its acquisition goals, almost always enterprise software companies, in which to acquire rival firms in one place and gain market dominance. while combining to reduce costs.

“Does he need Sheth to oversee the process of running the companies? I don’t think so,” said a current Vista investor. “I think where he can work is in pricing the deals.”

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A possible case in point: On January 31, Vista partnered with Elliott Management to buy software giant Citrix for $16.5 billion, or $104 per share. A historic round of tech stocks has since begun, with insiders predicting that Citrix’s value has been halved. Still, Citrix is ​​trading at more than $98 per share as the market believes the $104 deal will close in the next few months due to a tightly-written merger agreement.

Smith lost on the Broncos to Walmart heir Rob Walton.
Smith lost on the Broncos to Walmart heir Rob Walton.
Associated Press

A consultant to private equity firms said of the Citrix deal, the banks that agreed to finance the deal lost $1 billion when they resell Citrix’s debt at less than par.

“This is the biggest bust of the year,” the advisor said.

For comparison, Elon Musk has suggested he walks away from his agreement to buy Twitter for $54.20 per share, yet shares of the social network are trading at just $38. Difference: Vista is in the business of buying companies and if Smith breaks the merger agreement in what is seen as a minor excuse, it will be very difficult for him to win the trust of other sellers.

Sources said Smith decided not to make a formal bid for the Denver Broncos after some Vista investors expressed concerns.

Despite the setbacks, insiders say Smith is focused on the future in Vista – and it looks like he’s thinking about offense more than defense.

As recently as a few weeks ago, Vista was looking to take advantage of the technical market chaos and acquire software companies that traded near 52-week lows, said a source with direct knowledge of the situation. According to a source close to the situation, Vista is doing this by sending out opportunistic letters intended to pressure a company to sell.

“Vista calls the CEO to see if they are interested in selling, the CEO says no and then they force the directors to hold board meetings,” the source said.

Nation World News Desk
Nation World News Desk
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