TPG’s exit of CAA returns around 2x MOIC for continuation fund investors

Investors in a TPG continuation fund made a healthy return on the exit of talent agency giant Creative Artists Agency to Artémis, the family office of French billionaire François-Henri Pinault, Secondaries Investor has learned.

Fort Worth-headquartered TPG agreed to sell CAA in September with the transaction set to close by year end, according to a statement. The continuation fund transaction was completed in 2021.

Investors in the continuation fund will make a return of around 2x multiple on invested capital, according to five sources familiar with the matter. The vehicle will make an internal rate of return of more than 30 percent, according to six sources.

Those buyers in the $1.5 billion vehicle include Goldman Sachs Asset Management, ICG Strategic Equity, Neuberger Berman, Pantheon, Strategic Partners, Temasek and Whitehorse Liquidity Partners, sources said.

The company’s enterprise value was marked at around $3 billion at the time of the continuation fund, according to four of the sources, and saw a roughly $7 billion enterprise value at the time of exit, according to five of the sources.

CAA’s development was achieved principally through organic growth after the coronavirus pandemic rebound when live events came back, one of the sources said. Demand from streaming services such as Netflix, Apple TV+ and Hulu also contributed to growth, they added. The company also completed a large add-on, acquiring rival ICM Partners in September 2021.

The pandemic aside, CAA experienced consistent growth across TPG’s hold, another source said. The company’s organic growth was driven by the likes of content proliferation, sports rights and live touring, they added. CAA also shifted from a closely held partnership to an equity culture.

PJT Park Hill advised TPG on the transaction in 2021, Secondaries Investor reported at the time.

TPG, GSAM, ICG Strategic Equity, Pantheon, Strategic Partners, Whitehorse and PJT declined to comment. Spokespeople for Neuberger Berman and Temasek did not respond to a request for comment by press time.

TPG first invested in CAA in 2010 via its 2008-vintage TPG Partners VI. The vehicle closed on $18.87 billion, according to PEI data. The firm later boosted its stake in CAA above a majority hold.

Investors in the sixth fund were given the option to cash out of their exposure to the deal or roll their interests with the GP into the continuation fund, Secondaries Investor reported in 2020.

A recent white paper by Upwelling Capital Group argued certain requirements are key to ensuring continuation funds are used in the best interest of LPs. However, it refutes recent criticism in the mainstream financial press around continuation funds, affiliate title Private Equity International reported.

Among the points it argues against, the paper asserts continuation funds do establish fair pricing from a third party. It also argues existing LPs in a fund are not worse off when faced with such transactions. Rather, they can benefit from a wide range of incentives to participate, including discounted carried interest and management fees.

High-quality assets, a comprehensive transaction process and strong alignment of interests are key to a successful GP-led, the paper found.