TA Associates Aims at Foreign LPs To Raise New Fund

TA Associates is preparing to raise a new $500 million private equity fund that primarily will be marketed to limited partners based outside of the United States. The fund – named TA Atlantic & Pacific V – is expected to hold a first and final close in December.

The Atlantic & Pacific family of funds traces its roots back to the early 1980’s, when tax laws made it difficult for private equity firms to raise funds that included both U.S. and foreign limited partners.

Rather than deal with the complex legal paperwork, TA Associates simply began raising separate vehicles that co-invested with one another on a pro rata basis.

The practice has continued to this day, as TA manages five Atlantic & Pacific funds for foreign LPs, a pair of predecessor funds named Advent Bermuda and Advent Atlantic, plus nine funds for domestic LPs, including the $2 billion TA IX which closed in 2000.

Most of the tax justifications have dissipated with time, but TA has maintained its dual fund structure. The only real difference at this point is that TA sometimes provides domestic LPs with securities distributions from public portfolio companies, while the firm liquidates such securities for foreign investors, and then distributes cash.

“The last Atlantic & Pacific fund was $500 million and this one is supposed to be the same size,” says Kevin Landry, chief executive of TA Associates. “But our investment pace went up last year and appears that it will go up again this year, which means that it could be a bit larger. If it stays the same size, we’ll probably have just our existing LPs, but we could invite some new LPs if [the fund] gets larger.”

Landry announced in 1999 that he would retire when TA IX was fully invested, which should have been a few months ago. Due to the private equity market slowdown, however, Landry now says he will remain on board until the spring of 2006, at which point he will partially scale back his involvement.

Andrews McLane, a senior managing director with TA, also is expected to follow a similar course.

Save for those likely changes, Atlantic & Pacific V will not deviate from the traditional TA Associates investment strategy, which is to make control investments in technology, finance and health care companies. It also participates in some earlier-stage deals, and makes mezzanine investments out of a $500 million subordinated debt fund.

Landry says that the firm has no current plans to replace or augment its mezzanine vehicle with a business development company (BDC).