Robert F. Smith's Vista Equity wins as Delaware court dismisses $4.6 billion KnowBe4 lawsuit

A Delaware court has cleared Robert F. Smith's Vista Equity Partners of a stockholder challenge to its $4.6 billion take-private of cybersecurity training company KnowBe4, dismissing claims that co-investors KKR and Elephant Partners formed an unlawful control group that pushed the deal through at the expense of minority shareholders.

Chancellor Kathaleen McCormick issued the May 27 ruling, dismissing claims brought by former KnowBe4 Class A stockholders Bill Le Clair and Joseph Pospisil. The plaintiffs had argued that KKR, Elephant Partners, and KnowBe4 founder Sjoerd Sjouwerman collectively constituted a controlling bloc that breached fiduciary duties to minority shareholders and pushed the transaction through with insufficient disclosures.

The court rejected that argument. Chancellor McCormick treated KKR as a minority rollover stockholder rather than a controller, which was the critical legal pivot. Without a control group, the elevated standard of judicial scrutiny that the plaintiffs needed did not apply.

The decision validates the deal structure Vista and its co-investors used. A clean MFW process, a special committee kept walled off from rollover investors, and a fully informed minority shareholder vote carried the $4.6 billion transaction across the finish line despite the presence of a major sponsor like KKR rolling equity into the deal and a banker with side investments tied to that sponsor. The court found none of that created the control group the plaintiffs needed to trigger an entire fairness review.

A third count, alleging the deal violated KnowBe4's charter equal-treatment provision, was dismissed separately because the plaintiffs failed to brief it.

Vista acquired KnowBe4 in 2023, taking the Clearwater, Florida-based cybersecurity awareness training company private at $24.90 per share, a premium to its trading price. The deal was one of the larger software take-privates of that year. KKR and Elephant Partners rolled equity into the post-transaction entity alongside Vista.

Smith founded Vista Equity Partners in 2000 and has built it into a $107 billion software-focused private equity firm. The KnowBe4 ruling comes one week after a separate development at Vista Credit Strategic Lending Corp., where a single large investor's redemption demand triggered the fund's quarterly redemption cap. The Delaware dismissal is a cleaner outcome, removing legal uncertainty from one of Vista's marquee transactions in the cybersecurity sector.