Second rodeo

29 October 2015 By Jeffrey Goldfarb

TPG is trying to sprinkle a little vintage Goldman Sachs fairy dust around the place. The buyout shop with $74 billion under management hired the bank’s former president, Jon Winkelried, to be co-chief executive alongside co-founder Jim Coulter. The decision suggests that no one internally was better suited for the job than a man who rode off mid-financial crisis for a cowboy’s life.

The firm formerly known as Texas Pacific Group lags its fellow private-equity pioneers in building management structures commensurate with growth ambitions and ultimately going public. TPG co-founder David Bonderman, now chairman, said early in 2014 that he was considering an initial public offering. The firm’s chief investment officer said recently it could happen in the next three years.

Winkelried isn’t an obvious choice to be part of a long-term succession plan. At 56 he is a year older than Coulter. Moreover, his main experience is in fixed-income trading, not investing. He could nevertheless prove valuable to whip an IPO into shape or corral a management team at TPG. Though he left Goldman in 2009 under something of a cloud – to pursue ranching after being bailed out financially by his employer, according to media reports – it is hard to rise so far at the Wall Street firm without serious ability.

There is work to be done at TPG. The firm operates, for example, without a chief financial officer. Its general counsel said in April he was leaving and a replacement hasn’t been named. TPG settled a legal fight with its former communications chief, but not before he went to the U.S. Securities and Exchange Commission with allegations about the fees TPG charges investors. Its seventh buyout fund is still working toward its $10 billion target, half the size of its last fund in 2008, after a first close in March at $6.5 billion.

Winkelried will, however, have to overcome being an outsider. Tony James, hired by Blackstone from Credit Suisse in 2002, brought a rare combination of investing and management skills. Goldman’s Marc Spilker, on the other hand, left private equity firm Apollo in 2014 after less than four years as president. He wasn’t the first senior alumnus to struggle to replicate Goldman-like success elsewhere. TPG sees a cultural fit. That leaves it up to Winkelried to take the bull by the horns.

 

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