Buyout firm TPG’s fourth-quarter earnings jump 34% on strong asset sales

TPG’s fourth-quarter after-tax distributable earnings rose 34% year-on-year, driven by strong asset sales across its portfolio of private equity, impact investment, growth equity, and real estate assets.

The performance of many private equity firms were boosted by a record-breaking year of deal-making in 2021, buoyed by buoyant public markets, the availability of cheap capital owing to low interest rates, and economic recovery from COVID-19 pandemic.

TPG’s peers Blackstone, Carlyle, and KKR & Co Inc all reported record fourth quarter earnings as the firms sold off assets for top dollar last year.

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The Forth Worth, Texas-based firm said its after-tax distributable earnings, which represents the cash used to pay dividends to shareholders, rose to $137m from a $102m a year earlier.

Its after-tax distributable earnings slightly exceeded the average Wall Street analyst estimate of $133m for the fourth quarter, according to financial data provider Refinitiv.

TPG said it generated $7bn from asset divestments across its portfolio in the quarter and spent $8bn for new acquisitions, mostly in its private equity and real estate businesses.

Under generally accepted accounting principles, TPG reported a 46% drop in net income to $326m, owing to a slowdown in revenue from capital allocation activities. TPG said it ended the quarter with $114bn in assets under management and $28bn in unspent capital.

Buyout firms face a more challenging year in 2022. The U.S. Federal Reserve has started raising interest rates to combat inflation and is expected to begin unwinding its bond-buying program, thus ending the era of easy financing for leveraged buyouts.

TPG said it still expects to capitalize on opportunities to invest in the current climate, particularly among growth-oriented companies that are shelving or postposting plans to go public amid a slowdown in stock market valuations.

“The IPO and SPAC markets are essentially shut down right now, particularly across the growth investing landscape, and we think it creates more opportunity for us because they are competitors to private equity as companies look for sources of capital,” TPG Chief Executive Officer Jon Winkelried said in an interview.

“We’re looking to be capital partners with really interesting strong companies but in the private markets.”

TPG made its stock market debut in January after raising $1.1bn from an initial public offering that valued the firm at $9 billion.

Source: FX Empire

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