Wall Street’s Hot Fads Converge With Dyal, Owl Rock Merger

(Bloomberg) -- Two of the hottest fads of financial engineering on Wall Street in recent years are poised to intersect in a complex deal, taking the industry yet another step further away from its simple role of funding companies.

On one side is Neuberger Berman’s Dyal Capital Partners, at the forefront of the burgeoning business of taking stakes in money managers such as private equity firms. It’s in talks to merge with credit-focused Owl Rock Capital Partners and, simultaneously, with one of the many blank-check vehicles that have rushed to market this year. In one swoop, the trio could create a new company that’s publicly listed.

In Wall Street parlance: The deal would amount to a merger and reverse merger of asset managers. Its architects peg the value of their proposed creation at about $13 billion, according to a person familiar with the situation.

Dyal, Owl Rock and Altimar Acquisition Corp., a special purpose acquisition company backed by HPS Investment Partners, said on Wednesday they have signed a nonbinding letter of intent for a potential transaction.

“The founders of Owl Rock and Dyal would lead the stand-alone firm, and the investment teams and processes would remain unchanged,” Dyal and Owl Rock said in a statement. Altimar, led by Chief Executive Officer Tom Wasserman, said that it was in the process of conducting due diligence and that the deal isn’t guaranteed.

The talks mark a collision of trends that have reshaped public markets. Private equity firms have bought up vast parts of the corporate world. But much of the wealth their executives have amassed is illiquid. Dyal has helped make founders billionaires by buying minority stakes in their firms.

Meanwhile, in a hallmark of 2020, a small army of new SPACs launched, raising more than $65 billion -- approaching the total from all previous years combined. SPACs can offer companies a faster path to stock exchanges without having to undergo the scrutiny of an initial public offering.

“We have seen a significant increase in SPAC fundraising driven by a number of factors including the continued strength of equities, a challenging market for IPOs this year, and more SPAC sponsors with strong track records raising capital,” said Brenda Rainey, managing director of Bain & Co.’s global private equity practice.

Altimar raised $275 million in an October IPO. At the time, the company said it would focus on finding targets in four industries in which HPS has expertise: health care, financial services, consumer and technology, and media and telecommunications. Dyal has owned a minority stake in HPS since 2018.

See also: Owl Rock Sells a Stake to Dyal Amid Private Credit Frenzy

Dyal, founded in 2011 by former Lehman Brothers executives Michael Rees and Sean Ward, manages about $22 billion, according to its website. The firm’s funds own stakes in other asset managers such as Silver Lake, Vista Equity Partners and Starwood Capital Group.

Dyal itself has also been a fundraising machine. It’s on track to meet or exceed $9 billion for its fifth fund, a person familiar with the matter said. Funds that count Dyal as an investor are on pace to collectively raise more than $100 billion this year.

Owl Rock, the direct lender founded in 2016, manages $23.7 billion of assets. Co-founders Doug Ostrover, Marc Lipschultz and Craig Packer held senior positions at Blackstone Group Inc., KKR & Co. and Goldman Sachs Group Inc., respectively. Last year, Dyal made an investment in Owl Rock that valued the firm at about $2.5 billion.

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