New York-based investment firm Neuberger Berman's permanent capital vehicle, Dyal Capital Partners III, has acquired a minority stake in private equity firm HIG Capital. The deal values HIG at around $4.5 billion, according to media reports.
A permanent capital vehicle, unlike a typical private equity fund, can continue to make investments permanently, meaning it is not required to sell assets and distribute the returns within a set period of say ten to twelve years. Dyal, which has over $6 billion devoted to permanent capital investing, takes minority equity stakes in institutional alternative asset management firms.
Dyal acquired a passive non-voting stake of less than 15 percent of HIG. The funds will mostly be used to boost HIG's investments in its own funds, and to finance a number of growth initiatives in the small and mid-cap market, HIG said.
HIG, which was founded in 1993, manages over $20 billion in equity capital. Its funds, which span private equity, growth equity, real estate, credit, lending, and biohealth, invest in companies across the US and Europe.
HIG is currently investing from several funds, including HIG Brazil & Latin American Partners, which raised $740 million in 2015, HIG Capital Partners V, a $1 billion fund from 2013, HIG Europe Capital Partners II, HIG Middle Market LBO Fund II, and HIG BioVentures II, according to PEI data.
Dyal, established in 2011, manages three independent permanent capital funds and 18 minority partnerships.
In July, Dyal bought a 10 percent passive, non-voting minority stake in Silver Lake, which manages $24 billion in assets, as reported by PEI. Dyal Capital Partners III has received commitments from New York State Common Retirement Fund and the State of New Jersey.
The third permanent capital vehicle follows the $1.8 billion Dyal Capital Partners III fund, which was raised in 2014 and obtained a $200 million commitment from the New Jersey Division of Investment. The pension also has a maximum $50 million allocation to make co-investments with Dyal, as reported by PEI.
Dyal isn't the only one acquiring minority stakes in other private equity funds: Goldman Sachs Asset Management, Credit Suisse, and Hycroft have also set up similar businesses. Revenue comes from sharing management fees, returns from GP commitments, and profits from portfolio firms.
Spokespeople for HIG and Dyal declined to comment beyond what was said in the press release regarding the size of the stake and how the proceeds from Dyal's investment would be used.
HIG's Bayside Capital manages HIG's distressed investments, typically offering loans of between $10 million and $100 million to companies in industries including business services, manufacturing, healthcare, retail, agriculture and specialty finance. Last month, the firm reached a $1.1 billion final close on its HIG Bayside Loan Opportunity Fund IV and a €260 million first close on the IDeA Corporate Credit Recovery fund, a distressed fund focused on Italy launched in coordination with IDeA Capital Funds.
HIG WhiteHorse is HIG's direct lending platform. The firm provides unitranche, senior and subordinated debt capital to mid-market companies in the US and Europe. In May, WhiteHorse provided €40 million in unitranche financing in support of the acquisition of Schiederwerk, a Germany power supply company, by Legris.