Robert F. Smith just got a bit richer.
IBM is acquiring Apptio, a FinOps (Financial Operations) firm bought by Smith and his private equity firm, Vista Equity Partners, in 2019.
Smith, CEO of Vista Equity Partners and recognized as one of the wealthiest Black persons in the United States, has become even more affluent as a result of the sale of Apptio, a provider of financial and operational IT monitoring and optimization software to businesses.
The IBM Deal
On June 26, Vista Equity Partners announced that it had struck a deal to sell Apptio to IBM for $4.6 billion, yielding a 142 percent return on his $1.9 billion investment Vista spent in 2019 to purchase the Bellevue, Washington-based software company.
In a separate statement, IBM stated that it will fund the purchase using cash on hand and expects it to completion in the second half of 2023. According to its statement, Vista, which known for investing in software businesses, “has completed or signed 18 monetization events across full and partial exits, recapitalizations, block sales and a follow-on offering,” since November 2021, generating “$18.0 billion in total value.”
The IBM agreement might also be a personal victory for Smith, who is trying to convince his investors that the firm has moved on from his admission of tax cheating, Markets Insider reported.
IBM, once a leading technology company in business machinery, is expected to gain access to a FinOps that services more than 1,500 clients, including big IT giants such as Amazon, Microsoft, and Google, which have gained significant market share in cloud computing space — the very same clients that contributed to IBM’s decline.
After failing to adopt cloud computing in the technology business, the acquisition represents a major turnaround in IBM’s attitude to it. The company’s downward spiral was caused by its reliance on hardware, software, and traditional IT services rather than adapting to the rise of cloud computing, mobile technologies, and artificial intelligence.
Smith’s Ups and Downs
In 2000, Smith, who worked at Goodyear and later at Kraft General Foods as a chemical engineer, founded Vista Equity Partners to invest in businesses that develop and use technology, software and data to promote economic equity, ecological responsibility and diversity and inclusion for the prosperity of all. The Cornell grad built Vista into a company with over $96 billion in assets under management, and in the process making in a multi-billionaire with a reported net worth of $8 billion.
But some 20 years later, Smith was the subject of a government investigation. According to the feds, Smith hid more than $200 million in income in a scheme he had been involved in for the previous 15 years before U.S. prosecutors and IRS authorities worked for four years to uncover it in August 2020.
The investigation found he had failed to report a significant amount of income to the IRS and avoided paying millions of dollars in taxes by using an offshore trust structure and offshore bank accounts.
Without going to trial, Smith cut a deal with the Justice Department after admitting in a six-page document to avoiding more than $43 million in taxes over a decade and filing false returns on numerous occasions. He agreed to pay a fine, forgo tax deductions for $182 million in charitable contributions, and cooperate with prosecutors for five years in investigations, including their case against Texas software mogul Robert T. Brockman, who used a maze of unknown Caribbean corporations to hide $2 billion from Vista.
Smith is also known for his philanthropy. In 2019, for example, he donated $34 million to make good on his promise to pay off the student loan debt of the entire Morehouse class of 2019.
