TPG Launches Wealth Management Comeback with $2B+ Shopping Spree

You’re reading Value Add’s weekly briefing, the leading newsletter for the operating side of private equity. Here’s what you need to know this week, from insights for PE-backed executives and portco news to recent buyouts and investment trends. 

Insights

Chart of the Week: A newly released study by KPMG found that the leading factor in the current slowdown in M&A activity among PE-backed companies is the decision to prioritize organic growth. The suggestion is that, in the current economic environment, operational improvements have become more important in PE-backed companies than other forms of value creation. (Read More)

More Insights

• Apollo: “You Can’t Talk in the ESG, Alphabet-Soup Jargon” to CFOs (Read)
• Exits Are More Sensitive to Interest Rates Than Buyouts (Read)
• History Shows Interest Rates Alone Have Marginal Impact on Buyout Activity (Read)
• “We’ve Moved Downmarket”: Behind Riverside’s Unique Roll-Up Strategy (Read)
• US PE’s Outperformance of European PE is Structural, Not Operational (Read)

Spotlight

Minority stakes... Last week news broke that TPG has eyes on minority stakes in two wealth management businesses: Homrich Berg and Creative Planning.

While financial details of the first deal are not available, what is known is that TPG, along with New Mountain Capital, will retain minority stakes that value the Atlanta-based firm at $1 billion. Homrich Berg currently supervises over $18 billion in assets.

With Creative Planning, TPG beat out competitors including CVC and Permira for the minority stake in the Midwestern firm. TPG’s stake is reportedly worth $2 billion, valuing the business overall at $15 billion. Creative Planning currently supervises over $300 billion in assets. General Atlantic is also a minority investor as of 2020 and is looking to offload a percentage of its stake in the transaction. 

… for major shifts? Both acquisitions will be minority stakes that allow management to maintain control over day-to-day operations. But that doesn’t mean that there isn’t an operational component to the deals.

Homrich Berg, for example, plans to use the capital injection to invest in human capital, which will in turn allow the company to offer better customer service and expand its range of client offerings.

With Creative Planning, the main purpose of the transaction is to help General Atlantic offload a portion of its stake. However, it is also likely that the firm will use this capital to continue its strategy of growth through acquisition as roll-ups and scale plays are very common in PE wealth management deals. 

Over the past year, the firm has acquired:

• Goldman Sachs’ personal finance management business (August 2023)
• Mesirow’s $13 billion retirement plan business (October 2023)
• ML&R Wealth Management for $2.2 billion (April 2024) 

Off-trend. TPG hasn’t been active in the wealth management space for over a decade, when it exited its only wealth management asset to date, LPL Financial. TPG bought the asset in 2005 alongside Hellman & Friedman, taking it public with a successful IPO in 2010. 

TPG’s comeback to the space is relatively late. As we reported a few weeks ago, some industry executives think private equity has hit the ceiling when it comes to the amount of M&A the sector can support. Given that M&A plays a key role in the sector’s attractiveness to PE (alongside the attractiveness of steady fees), that could pose a problem. 

Indeed, in its January 2024 report, McKinsey noted a significant market contraction of $6.2 trillion in AUA for 2022, signaling intense market competition for clients in the years to come. 

TPG, Creative Planning, and Homrich Berg did not respond to requests for comment.

Buyout News 

What else was going on in the world of buyouts?

First, it looks like we spoke too soon last week – Vista and Blackstone upped the price on Smartsheet again. At least this price tag is the final one. At $8.4 billion – or $56.50 a share, a 41% premium over the average price for the 90 days before the sale process was announced on 17 July – the deal is finally set to close in Q4 of this year. 

Additionally, LVMH-owned L Catterton acquired [solidcore], a US-based chain of pilates studios. The deal values the company between $600 million and $700 million, according to Reuters. It’s not L Catterton’s first foray into the luxury workout space: it also has invested in Equinox and Pure Barre. 

There are also many deals coming through the pipeline. Here’s what’s dominating the rumor mill:

Enfusion, a financial software provider for asset managers, is launching a sale process and interviewing investment banks in the process. The firm is worth $1.1 billion and is publicly traded. It fielded investment interest last year, too, with players including Francisco Partners, Vista, and Irenic Capital Management expressing interest.

Meanwhile, Sanofi is wrapping up its sale process for its over-the-counter medication division. CD&R and PAI Partners have reportedly both placed binding bids that could value the business at €15 billion ($16.7 billion) or more. PAI’s bid will include a consortium of investors (British Columbia Investment Management, the Abu Dhabi Investment Authority, and the Singaporean sovereign wealth fund GIC have all been contacted). 

Apollo Global Management is mulling a $5 billion investment in Intel, a stalwart American chip maker that has had trouble keeping up with the competition during the past few years of the AI boom. Apollo’s potential offer would be in direct competition with the friendly takeover floated earlier this month by Intel’s direct competitor, Qualcomm. 

Another American institution also fielding PE interest? Forbes. The media mainstay is reportedly being eyed by Koch Inc.’s private equity arm, Koch Equity Development. An $800 million bid to take over the company fell through last year. 

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