Owl Rock Capital Partners, Dyal Capital Partners May Merge
December 4, 2020
Owl Rock Capital Partners LP is discussing a merger with Dyal Capital Partners through a blank-check firm that would then take the combined company public, The Wall Street Journal reported Dec. 2, citing people familiar with the matter.
The special purpose acquisition company would value the merged asset manager at about $13 billion, according to the report.
Owl Rock Capital Partners is the ultimate parent of Owl Rock Capital Advisors LLC, which is the sponsor of the publicly traded business development company Owl Rock Capital Corp.
Dyal and Owl Rock said they have been discussing a deal with a special-purpose acquisition company called Altimar Acquisition Corp.
As part of the deal, the firms could also raise additional capital, as is often the case in mergers with blank-check companies like Altimar. There are no guarantees the various parties will ultimately reach a deal, especially given the additional complexities posed by effectively pulling off two transactions at once.
Should it come together, it would be the latest in a recent series of asset-management deals and combine one of the biggest owners of private-equity firm stakes with an upstart credit investor that has posted rapid growth financing deals for many of the same private-equity firms.
It would also fit into another major theme in the world of deals in 2020: SPACs, which have exploded in popularity and offer an alternative to an initial public offering. They essentially go public without a business and then hunt for one with which to combine.
Altimar, sponsored by an affiliate of investment firm HPS Investment Partners LLC, went public in October as part of a wave of SPAC issuance.
Dyal for its entire existence has been a unit of Neuberger Berman Group LLC, the privately held investment firm with $374 billion of assets under management including $103 billion in what are called alternative assets. Neuberger would retain a meaningful stake in the combined company as part of the transaction being discussed and intends to remain a long-term holder, the people said.
Founded in 2011 by Lehman Brothers veterans Michael Rees and Sean Ward, Dyal is the largest player in the market for minority stakes in private investment firms, including private-equity firms, credit shops and hedge funds. It owns nonvoting stakes, typically between 10% and 20%, in more than 40 firms including Silver Lake, Vista Equity Partners, Providence Equity, Platinum Equity and Sixth Street Partners.
Last year, it paid about $500 million for a 20% stake in Owl Rock. And in 2018, it took a stake in HPS.
Dyal, which manages $21.9 billion in aggregate capital commitments, has done deals at a torrid pace. Last year, it finished raising a $9 billion fund—its fourth such vehicle—and is already working on raising a new fund, according to people familiar with the matter.
Unlike typical private-equity funds, which tend to wind down after a decade or so, Dyal’s funds consist of what is known as permanent capital, meaning the money doesn’t have to be returned to investors over a specific time period. Because of that, they produce a fairly steady stream of fees, which could help the combined company appeal to public investors.
Dyal has previously floated the idea of an IPO of one or more of its funds as a possible way to allow its investors the option of monetizing their holdings, the Journal has reported. The transaction being discussed, however, is an IPO of the management company and wouldn’t alter the liquidity opportunities for fund investors.
Owl Rock was founded in 2016 by Doug Ostrover, who co-founded GSO Capital Partners and sold it to Blackstone Group Inc.; former KKR & Co. partner Marc Lipschultz and former Goldman Sachs Group Inc. banker Craig Packer. It has shot up to $23.7 billion in assets, which it manages primarily through business-development companies.
Based in New York, the firm focuses on a fast-growing area of the market known as direct lending, in which nonbanks make loans to midsize companies, many of them private-equity backed, and hold them on their books. Such lenders have been on the rise since the aftermath of the financial crisis when banks shed many of their riskier businesses.
Years of low interest rates have led institutional investors such as pension funds to pour billions of dollars into direct-lending strategies in hopes of reaping higher returns than traditional fixed-income securities would offer.
Sources: S&P Global Market Intelligence, Wall Street Journal
