TPG Said to Adopt 'Eat What You Kill' Executive Profit Share

  • Portion of staff pay will be based on performance of deals
  • Staff won't receive profit until investors get capital back

TPG Capital, the alternative asset manager co-founded by David Bonderman, is changing the way it assigns profits to staff to more closely align it with individual performance, said people familiar with the matter.

For TPG’s latest buyout fund, TPG Partners VII, the firm will assign some profits it makes from exiting portfolio companies to the individuals directly involved in the deal, said the people, who asked not to be identified because the information is private. That will replace the current practice of sharing all profits, known as carried interest, across the partnership.

The firm’s seventh fund, which is being raised with a target of $10 billion, had a first close at $6.5 billion.

The change to the structure means that individuals who work on successful deals will receive more than those whose deals fail or underperform. TPG has had mixed results across its industry teams in recent years, with its health care team posting gains, including a $5 billion profit on its sale of Par Pharmaceutical Holdings Inc. last year. Other deals, such as its attempt to prop up lender Washington Mutual Inc. after the financial crisis, have failed.

A spokesman for TPG declined to comment.

TPG is the latest firm to adopt a so-called “eat what you kill” component for staff pay. BC Partners is also moving to the structure for its new fund, which is expected to come to market this year, while CVC Capital Partners has historically based part of its profit share on deal performance.

The firm named former Goldman Sachs Group Inc. executive Jon Winkelried as co-chief executive officer in October, to focus on diversifying TPG’s lines of business as it contemplates going public. Since 2011, Winkelried has advised TPG’s credit funds, which are run by former Goldman Sachs partner Alan Waxman.

(In a previous version of this story, the reference to which profits are shared was corrected.)

(Updates with Winkelreid hire in final paragraph.)
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