Private Equity Shakedown #3: Quintiles Transnational (Q)
By now I’m likely sounding like a broken record, and you’ve probably figured out that management, transaction and termination fees are standard practice in private equity circles. Every buyout includes these fees in the acquisition agreement. However, the history behind TPG Capital’s involvement in Quintiles Transnational Holdings (Q) makes this a little less mundane than your garden-variety buyout.
One Equity Partners, the private equity arm of JPMorgan (JPM), acquired Quintiles in 2003 for $1.7 billion. One of the minor PE firms investing in the buyout was TPG, who invested $90 million in equity. Four years later, TPG and Bain Capital bought One Equity’s stake for $3 billion, with TPG investing another $424 million in equity, which means it spent $514 million prior to Quintile’s IPO in May 2013.
But don’t feel sorry for TPG. It got a lot more than it gave, including $147 million in the IPO, $266 million in additional stock sales, $345 million in dividends and $12 million in management fees. And its remaining 17.9 million shares are worth $900 million as of April 9. That’s a total of $1.67 billion TPG managed to scrape from Quintiles.
So, what should investors take away from all of this? Well…