Vista Foundation, Endeavor fund co-head departures don’t trigger key-person provisions

The leadership changes on the firm's small-cap and mid-market funds are understood to have not required key-person approvals by limited partners.

Two senior leaders of smaller Vista Equity funds are stepping out of day-to-day management and into advisory roles as the firm works to move on from chief executive Robert Smith’s tax evasion scandal.

Vista said on Wednesday that Alan Cline, co-head of the firm’s small-cap Endeavor fund, and Rob Rogers, co-lead on the mid-market Foundation funds, are moving into senior advisory roles.

The firm moved Vista veteran Rachel Arnold into co-lead on Endeavor, alongside Rene Stewart. Vista also promoted Patrick Severson to co-lead the Foundation funds alongside co-head Marc Teillon.

The leadership changes on Endeavor and Foundation did not require key-person approvals by limited partners, sources told affiliate title Buyouts.

Key-person provisions ensure the leadership that LPs back at the beginning of a fund remains through the fund life. A key-person provision can be triggered by the departure of one or more individuals. When triggered, a fund generally loses the ability to make new investments until the new leadership slate is approved by LPs.

“There isn’t a single trigger on either of them. Key man is fairly loose,” said an LP with knowledge of the firm. The LP said they were surprised by the changes. “Seems like an odd time for both of them to conclude that they want to do less,” the LP said.

A second LP was optimistic about the leadership of the Endeavor fund. “They’re super strong… with lots of Vista years behind them,” the LP said about Endeavor’s leadership.

Arnold has worked at Vista since 2012, and before that held executive positions at four Vista companies, according to her profile on the company’s website. Severson joined the firm in 2013, before which he worked as a partner at Warburg Pincus.

“Rachel’s track record speaks for itself. She’s a proven and dynamic leader with strategic operating expertise developed through her work with more than 20 Vista companies,” Stewart said in a statement.

It is unclear why Cline or Rogers decided to step back. Their departures come after Vista’s former number two, president Brian Sheth, left the firm late last year in what he described as a long-term transition out, unrelated to Smith’s tax evasion investigation.

“This transition allows them to remain on the investment committees of their respective funds and serve as senior statesmen in the firm, while allowing for the next generation of leadership (and women) to step up their responsibilities,” according to a person with knowledge of the situation.

Rogers joined in 2002 and sits on the Foundation Fund investment committee, as well as Vista’s private equity management committee. Before Vista, he worked as director of finance and business development at Integra LifeSciences.

Cline first joined in 2001 and held multiple leadership roles at the firm, including as co-head of the Foundation fund for more than a decade, his biography said. He also is a member of Vista’s executive committee and the firm’s private equity management committee. He rejoined the firm in 2008.

Before Vista, he worked as general manager at Fandango, and before that, at Goldman Sachs in the M&A and high tech groups, his bio noted.

Foundation last year closed its fourth fund on around $4.5 billion last year. Endeavor closed its second fund on its $850 million hard cap in 2019.

Smith last year agreed with federal authorities that he should have paid taxes on a portion of carried interest from Vista’s first fund that he directed into an offshore structure. Smith had paid taxes on the portion of Fund I carry that flowed directly to him, court documents said.

Smith agreed to pay $139 million in back taxes, interest and fines and cooperate in a tax evasion case against his friend and partner, Houston software tycoon Bob Brockman. Brockman provided Smith with $1 billion as Vista’s first and only LP in the debut fund.

Federal authorities are investigating Brockman for allegedly hiding some $2 billion in taxes, the single largest tax evasion case in US history.