TPG explores secondary process on fund formerly led by McGlashan

TPG is exploring a process to enable investors in its second growth fund to sell their interests in the fund, a deal that could total more than $1 billion, three sources told Buyouts.

TPG’s growth family of funds was founded and led by Bill McGlashan, who was arrested this year for allegedly participating in a college-admissions cheating scheme. TPG said it fired McGlashan, while he says he quit before the firm fired him.

The growth funds, as well as the firm’s impact-investing funds, were launched and led by McGlashan and are now led by TPG Co-CEO Jim Coulter.

The firm was considering the secondary process on Fund II before McGlashan was charged. Several sources said the process stalled for a short time once McGlashan left the firm, but it appears to be back in the market.

They said the process is in its early days and the exact structure of the transaction is not yet finalized. But it will not be a fund restructuring, but a simple option for Fund II LPs to either sell their stakes in part or whole, or not, sources said.

The process also won’t involve a shot of fresh capital into a new fund, known as a staple, sources said.

TPG is working with Evercore on the process, sources said.

Luke Barrett, spokesman with TPG, declined comment.

Fund II, a 2011 vintage, raised $2 billion. The fund was generating a 1.98 total value to paid-in multiple as of February, according to New Jersey Division of Investment data.

TPG Growth platform has raised four funds to invest in small and middle-market growth-equity and buyout investments. Fund IV closed on $3.7 billion at the end of 2017. Key executives on the team for Fund IV were listed as McGlashan, Matt Hobart, Ransom Langford, Scott Gilbertson and Steve Ellis, according to a New Jersey investment memo.

TPG is no stranger to GP-led secondaries. Late last year, the firm completed a tender offer process on its fifth and sixth Asian funds, which totaled more than $1 billion. Lexington Partners led the deal, which was facilitated by secondary adviser Lazard. The Asia process included a staple of fresh capital into Asia Fund IV, which closed on more than $4.6 billion this year.

McGlashan was one of 50 people around the country accused in a broad FBI investigation of gaming the system to get their children into top universities.

TPG in April decided to strip McGlashan of all his vested and unvested profits in TPG Growth and Rise Funds and his unvested interests in TPG, the firm said then.

Action Item: Check out TPG’s Form ADV here: https://bit.ly/2AodJrS