"The man who runs Texas Pacific is flamboyant and you could argue that that is going to get people's backs up," says one private equity fund manager. "If you take Mike Smith, say, of CVC, we don't know much about him. It's the same for others, like Simon Palley at BC - they have a much lower profile. And therefore it is more intolerant of inefficiency."The lack of transparency has brought the sector under scrutiny, particularly in Germany, where the chairman of the ruling party described some private equity groups and hedge funds as acting like a "plague of locusts"."As private equity becomes bigger and bigger, it's going to face questions about transparency," says a senior adviser to private equity firms.But while Texas Pacific keeps a low profile, Mr Bonderman doesn't, which makes him a little unusual in the sector. "[Private equity firms] are not reporting to the market every quarter or six months and are owned by a small number of people," says a private equity expert at a leading City law firm."You have got a structure where you have short lines of communication, strong financial management discipline, a business that's focused on cash and not profit. In 2004, private equity groups announced deals worth $300bn - 60 per cent up on the previous record high in 2003.Investor interest in the industry is helped by its lower profile.
They believe they are the elite of the private equity firms."That reputation has attracted a lot of support from institutional investors. "With their last fund, they looked to raise $5.3bn and that was over-subscribed," says Mr Carey.Texas Pacific and the sector in general have expanded rapidly in recent years. It was formed in 1993 by Mr Bonderman, Jim Coulter and William Price and has raised $15bn (£8.4bn) since its inception. "They then turn them into winning investments by turning the operations around."One institutional investor says of the group's style: "When they buy companies, they are aggressive, and when they are looking to [float] them, they are aggressive."Based in Fort Worth, Texas, the group employs around 70 professionals, with its most high-profile investments including Burger King and the clothing retailer J Crew. The people who work there don't suffer fools gladly and most people are fools compared to them, in their eyes at least.
The group, which does not even have its own website, mostly keeps a low profile.One City insider, who has worked with Texas Pacific, says: "They are bright but tough. But since he bought the struggling caterer in late 2002, it has become a thorn in his portfolio.The deal was not unusual for Texas Pacific, which has a reputation for buying troubled or loss-making enterprises. "They often target, although not exclusively, under-performing companies that they can buy on the cheap," says David Carey, a senior writer on The Deal, a New York magazine that covers private equity. After all, more consumers than producers vote.Mark Tinker is a director of Execution Stockbrokers.
