Technology-focused private equity firm Vector Capital has taken on Dyal Capital Partners, a division of Neuberger Berman, as a minority partner. In recent years, Dyal has made investments in minority, non-voting ownership interests in other PE firms including: Vista Equity Partners, KPS Capital Partners, Silver Lake, H.I.G., along with lender Cerberus.

Vector, based in San Francisco, will use the capital to expand its businesses, but the firm will not change its strategy, investment process or day-to-day operations. Dyal’s ownership interest in the firm is a passive, non-voting, minority stake.

“This investment, which builds on our 20-year relationship with Neuberger Berman, provides Vector with permanent capital to strengthen our private equity business and further accelerate the growth of our credit business,” says Vector founder Alex Slusky.

“Through our capital and our business platform resources, we look forward to further enhancing Vector’s capabilities,” says Dyal Capital head Michael Rees.

For middle-market private equity firms, selling minority stakes is a path to raise capital for expansion of business lines and for some general partners to gain liquidity. As acquisitions have become so pricey, return margins are thinner and capital infusions from selling minority stakes can help private equity firms grow more quickly. Private equity firms can also use the capital to broaden their ownership base and bring in new, younger partners as the older partners look to retire or step back.

Kohlberg & Co. recently sold a minority stake to Stephen Schwarzman’s Blackstone Group LP (NYSE: BX), which invested with capital from its strategic capital holds fund under Blackstone Alternative Asset Management. Blackstone also bought a less than a 15 percent stake in Leonard Green & Partners.

Another middle-market PE firm, the Riverside Co., sold a minority stake to Parkwood LLC, a private trust company, with Riverside intending to spend the capital on its debt lending business, deal businesses in Europe and Asia, and possibly acquiring other private equity firms.

Littlejohn & Co. sold a minority stake—passive, non-voting and less than 10 percent-- to Goldman Sachs Alternative Investments & Manager Selection Group with plans to use the capital to grow. That investment was through the AIMS Petershill fund, which is set up to invest in minority stakes in PE firms, hedge fund managers and other alternatives management firms. Goldman’s Petershill fund also invested in a minority stake—also non-voting and less than 10 percent—in Accel-KKR, a private equity firm focused on tech companies.

Vector Capital manages $3.8 billion in tech company investments. The firm formed in 1997 as a spinoff of Ziff Brothers Investments, a family investment firm. Its investments have included taking public companies private, buying founder-owned companies, growth equity investments, recapitalizations, spinoffs and public company investments. The firm recently raised $1.4 billion for its fifth private equity fund, Vector Capital V. Among its recent deals, Vector agreed to sell 2020 Technologies, a software developer for interior space planning, to Golden Gate Capital.

Dyal Capital, which started in 2011, seeks to acquire minority equity interests in institutional alternative asset management businesses worldwide, with 27 such investments currently. Neuberger Berman, an employee-owned investment manager, has $295 billion under management in equity, fixed-income, quantitative and multi-asset class, private equity and hedge fund investments. On the Vector-Dyal deal, Kirkland & Ellis was Vector’s legal counsel and Fried, Frank, Harris, Shriver & Jacobson serving as Dyal’s legal counsel.

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