Will TPG fee practices and underperformance hinder ambitions? UNITE HERE asks

TPG’s use of monitoring fees, transaction fees, expense reimbursements in portfolio companies may not align GP & LP interests

SAN FRANCISCO--()--TPG Capital appears to continue to employ fee practices that have been flagged by regulators as problematic, even as the private equity industry faces increased scrutiny by the SEC, investors and the media, according to a report by UNITE HERE.

Other major buyout firms have pledged to end or limit their collection of accelerated monitoring fees.1 However, recent SEC filings by TPG portfolio companies show it continues to include such provisions. Filings also show that TPG charges additional fees to portfolio companies that include transaction fees and unspecified expense reimbursements.

TPG notes in its 2014 ADV that certain fee structures may not align GP and LP interests. TPG noted that portfolio company expense reimbursements and other fees are not offset from LP advisory fees, which “gives us an incentive to maximize the amount of these fees.”2

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KEY POINTS

  • 2015 IPO filings by Par Pharmaceuticals show the company intended to pay TPG $30 million at IPO in lieu of continuing payment of $4 million annual monitoring fee – payment for years of “monitoring” that TPG would not provide.3
  • Par Pharmaceuticals also reported that separate from management fees paid to TPG, it does business with other TPG portfolio companies to which it paid $16.8 million between 2012 and 2014.4
  • In addition to monitoring fees, TPG charges portfolio companies expenses and reimbursements that include “transportation and meals (including late night meals consumed at times when not traveling) and entertainment-related expenses,” according to the 2014 ADV.5
  • American Tire Distributors (ATD) paid TPG more than $33 million in monitoring, transaction, and other management fees between 2012 and 2014. Of that, $14.6 million represented monitoring fees, or less than half.6

1 “Blackstone to curb controversial fee practice,” Wall Street Journal, Oct 7, 2014.
2 TPG Capital Advisors, LLC, Form ADV, Part 2A March 31, 2015, p. 6
3 Par Pharmaceuticals SEC S-1/A filed May 12, 2015.
4 Par Pharmaceuticals SEC S-1/A filed May 12, 2015, p. 181
5 TPG Capital Advisors, LLC, Form ADV, Part 2A March 31, 2015, p. 6
6 American Tire Distributors Holdings Inc. SEC 10-K filed March 18, 2015 p. 87

Contacts

UNITE HERE Research
Alyssa Giachino, 310-795-5537
agiachino@unitehere.org

Release Summary

TPG Capital appears to continue to employ fee practices that have been flagged by regulators as problematic, even as the private equity industry faces increased scrutiny.

Contacts

UNITE HERE Research
Alyssa Giachino, 310-795-5537
agiachino@unitehere.org