Russia: Still the Wild West for Private Equity

TPG Capital, the only global private equity firm with a presence in Russia, is finding out just how difficult it can be to do business there. From its base in Fort Worth, TPG manages about $48 billion in assets and counts among its investments Energy Future Holdings, the Texas power producer whose $43.2 billion leveraged buyout in 2007 was the largest in history. Since setting up a Moscow office in early 2007, it has made only one Russian private equity deal: the September 2009 purchase of a 31 percent stake in superstore chain Lenta, and that deal has led to lawsuits and a violent brawl. "There are pros and cons to every emerging market," says Stephen Peel, the TPG partner who oversees the firm's Russian operations. "None of them is perfect."

Russia has attracted less private equity money than other emerging markets—$1.4 billion over the past three years, compared with $28.6 billion for China, $15 billion for India, and $5 billion for Brazil, according to the Emerging Markets Private Equity Assn. "Russia is still perceived as the wild, wild West, and the issues TPG is facing there aren't helping," says Jérémie Le Febvre, a partner at Triago, which helps buyout firms raise money. "Investors much prefer Asia and Latin America right now."