Dyal’s investment in KPS to fund GP commitments

The transaction, which follows a slew of minority investments made by Dyal in firms including HIG Group, Silver Lake and Vista Equity Partners, is ‘not about succession planning’, source says.

Dyal Capital Partners' acquisition of a minority stake in special situations firm KPS Capital Partners will be used in part to fund future GP commitments and for future growth initiatives, Private Equity International has learned.

Consistent with its strategy, Dyal Capital Partners bought a passive, non-voting ownership interest of less than 20 percent in the firm, KPS said in a statement on Friday.

“KPS's partners and professionals continue to own over 80 percent of KPS' equity interests,” said a source familiar with the transaction, adding that the investment is “not about succession planning in the near or long term”.

That person also noted that Dyal now shares KPS's profits pro-rata with KPS senior management, while KPS will continue to make investment decisions and run the day-to-day business.

The terms of the transaction were undisclosed, but Michael Psaros and David Shapiro, co-founder and managing partners of KPS, said in the statement that “KPS will maintain complete continuity of its partnership, investment team and execution of its investment strategy”.

KPS declined to comment beyond the statement.

The investment was made out of Dyal Capital Partners III, which acquires minority equity interests in institutional alternative asset managers. This year, it acquired minority stakes in private equity real estate firm Starwood Capital Group, HIG Capital and Silver Lake.

In 2015, Dyal invested $875 million for an 18 percent stake in Vista Equity Partners, its account balances and undrawn capital, and its recapitalised management company, as previously reported by PEI.

Dyal has made six private equity-focused transactions, in addition to transactions in hedge funds.

KPS, which has $5.5 billion in assets under management, closed its most recent fund, KPS Special Situations Fund IV, on $3.57 billion in 2013.

Dyal Capital Partners, which declined to comment, is an investment unit of New York-based Neuberger Berman.