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TPG Prepares To Launch Its Sixth Large Buyout Fund

Mega-buyout firm TPG will likely remember 2007 as the year when money—a lot of money—burned a hole through its pocket.

The $15 billion TPG Partners V LP that the firm closed just over a year ago in November 2006 is almost fully invested and TPG will soon be back in the market raising its sixth buyout fund, a source with knowledge of the firm told Buyouts. It is unclear what TPG Partners VI LP’s target will be, but our source said the firm definitely plans to eclipse the size of its fifth fund. TPG declined to comment for this story.

Industry watchers will follow TPG’s new fund closely, both to gauge limited partner appetite for mega-buyout funds and to get a sense of how confident mega-fund managers are in the wake of the credit crunch. Of course, TPG could deploy capital from the new vehicle in a host of ways, and not simply through large buyouts.

During the last 12 months the firm has been on a buying binge, snatching up or announcing the acquisition of an assortment of well-known companies, including wireless carrier Alltel Corp., telecom company Avaya Inc., medical products manufacturer Biomet Inc., casino giant Harrah’s Entertainment, Midwest Airlines and energy behemoth TXU Corp.

In a move to broaden its portfolio options, the firm is also raising TPG Star LP, geared to invest in small buyouts, venture deals and growth capital. In October, the firm reached $1.2 billion in commitments to the fund, surpassing the $1 billion target. At that time, the fund was left open, raising the possibility that TPG would accept more commitments for the fund.

TPG, formerly known as Texas Pacific Group, has also branched out geographically. It recently earned more than $4 billion in commitments for TPG Asia Partners V LP, a fund aimed at doing deals in Asia. It’s the first Asia fund the firm has raised since it absorbed Newbridge Capital, its Asian investment affiliate, last year. TPG Partners VI LP may invest alongside TPG Asia Partners V LP in larger deals, according to another source familiar with the sixth fund. TPG’s roots in China date back to 1995, when the firm first began looking at investments there. TPG has also invested in Europe and India.

Prior LPs in TPG funds include California Public Employees’ Retirement System, Duke Endowment, Florida State Board of Administration, Hamilton Lane, HarbourVest Partners LLC, Ontario Municipal Employees’ Retirement, TIAA-CREF and Washington State Investment Board, among many others. The firm is based in Fort Worth, Texas and has offices in 14 cities, including San Francisco, New York, London, Moscow, Singapore, Tokyo, Mumbai, Hong Kong and Melbourne.

TPG Partners V LP marked a significant jump in size from the firm’s prior vehicle, the $5.8 billion TPG Partners IV LP that closed in 2004. Four years earlier, the firm raked in $3.5 billion for TPG Partners III LP.—J.P.