TSG diversifies LP base in $1.3bn Fund VI

The firm, once known as The Shansby Group, reached out beyond its existing LP base to broaden its geographic exposure, hitting its Fund VI target in only 60 days.

TSG Consumer Partners, which has invested in iconic US consumer brands since 1987, is not a firm that has to worry much about finding capital in the tough fundraising environment.

The firm this week announced the closing of its sixth fund on $1.3 billion after only 60 days in the market. TSG, which has offices in San Francisco and New York, brought back the bulk of its existing limited partners and also attracted in a few new investors to the fund.

As part of its fundraising, which the firm accomplished without the use of a placement agent, TSG was able to broaden the geographic make-up of its limited partner base, according to Jamie O’Hara, managing director at TSG.

“We did seek to diversify and add some more international LPs,” O’Hara said. “There are different sources of capital throughout the world and it’s prudent to have a broad base [of LPs]. As you think about future fundraising, there could be a point in time when you need to draw on one group more than another. The more diversified you are, the more opportunity you have to do that.”

There are different sources of capital throughout the world and it's prudent to have a broad base [of LPs].

Jamie O'Hara

Fund VI’s fundraising haul eclipses that of Fund V, which closed on $875 million in 2007. The firm’s fourth fund raised $500 million in 2002.

TSG had about $1 billion of additional interest when it closed the fund, capping the vehicle at a level that allows the firm to “execute its strategy as opposed to scale up and have to think about a new and different strategy”, O’Hara said.

TSG focuses on branded consumer product investments in the mid-market, including natural and organic food companies and so-called “orphan” brands in the personal care and household sectors.

The firm looks for companies that are growing with the opportunity to add new products, enter new “channels of distribution” and create ways to enhance marketing to consumers, O’Hara said.

“We take the long-term view with regard to our investments and capitalise the companies conservatively so we can invest in the [various] growth avenues,” he said. “We focus on where the company is going to be in five years and focus less on where the company will be over the next one or two years.”

TSG’s portfolio companies on average “experienced double-digit growth” in 2008 and 2009, and this year the average growth rate was more than 20 percent, O’Hara said.

“We’re interested in putting the right capital structures in place to go after those growth avenues. We think less about where the trends are in an economic cycle,” he said. However, the firm has worked with portfolio company management to defend against market downturns.

The firm in September hired Blythe Jack as a principal at the firm. Jack spent 10 years working at Rosewood Capital.

TSG was founded in 1987 as a subsidiary of Montgomery Securities by Gary Shansby and Charles Esserman. The firm spun out of Montgomery in 1988 and changed its name to The Shansby Group. Shansby left in 2005, and the firm changed its name to TSG.