Published on March 8, 2014
A HISTORY OF
What is KKR? KKR & Co. L.P (Kohlberg, Kravis and Roberts) is a multinational private equity firm founded in America by Jerome Kohlberg Jr., Henry R. Kravis and George R. Roberts in 1976. They are pioneers in the leveraged buyout strategy, which they famously used to buyout RJR Nabisco in 1988. Their total assets are estimated to be worth roughly $40.3 billion as of 2011.
What is private equity? The keyword is “private”. Private equity is a class of financial assets made of stocks and debts from companies that aren’t publicly traded. Private equity companies provide a source of capital and investment for companies that cannot or will not go public. A common strategy in private equity is a leveraged buyout, in which a private equity firm buys majority control of another firm.
How does KKR operate? KKR’s staff consists of roughly 140 investment professionals and 400 total employees organized into 9 industry-focused groups. Chemicals Consumer Products Energy & Natural Resources Financial Services Health Care Industrial Media and Communications Retail Technology These groups typically conduct private equity leveraged buyout investments in their respective industries. Members of each group are expected to have professional knowledge of their respective industries.
The Beginnings of KKR Jerome Kohlberg, Henry R Kravis and George Roberts worked at Bear Stearns in the 60’s and 70’s. Their acquisition of Orkin Exterminating Company is one of the first major leveraged buyouts. In 1976, tensions between Bear Stearns executive Cy Lewis and the three founders led to a split and the creation of KKR. By 1980, KKR was one of the most prominent specialists of leveraged buyouts and would be well positioned for the buyout boom of the 1980’s. From left: Founders Henry R Kravis, Jerome Kohlberg and George R Roberts
The Buyout Boom KKR went on to make numerous major acquisitions during the 1980’s buyout boom. The Buyout Boom of the 1980s was a string of estimated 2,000 leveraged buyouts worth $250 million or more between 1979 and 1989. Notable acquisitions by KKR include Beatrice ($6.1 billion) and Safeway ($5.5 billion)
Initial Public Offering KKR filed for an IPO with the SEC in 2007, hot on the heels of rival Blackstone Group’s own IPO less than two weeks earlier. However, poor conditions in the IPO market resulted in the flotation being aborted. KKR announced in alternative plan to distribute shares in 2009, involving a reverse takeover of their affiliate KKR Private Equity Investors. KKR’s public listing on the NYSE officially opened in 2010. Henry R Kravis at the World Economic Forum in 2009
Today KKR remains largely unchanged and continues to successfully implement leveraged buyout strategies as the economy recovers. In 1996, KKR was able to complete the bulk of fundraising for what was then a record $6 billion private equity fund, the KKR 1996 Fund. They executed a $44 billion takeover of TXU (a Texas energy company) in 2007, which to date has proven to be the largest buyout completed to date. They recently finished a $2 billion energy fund in 2014 in order to capitalize on the North American energy boom.
KKR Green Portfolio In 2008, KKR launched their Green Portfolio, a project applying KKR’s performance analysis skills to measuring and mitigating the environmental footprint of participating companies. The project came about as a direct result of the TXU acquisition and represents the first collaborative effort between environmentalists and investors. As of the latest data taken in 2012, the Green Portfolio is estimated to have had a $917 million impact on avoided waste and water use over 19 companies.
Notable past and current employees Original founder Jerome Kohlberg left the company in 1987 due to strategy differences. He founded a new private equity firm Kohlberg & Co. Founders Henry R Kravis and George R Roberts remain at the head of KKR. Former Republican National Committee Chairman Ken Mehlman joined KKR as the Global Head of Public Affairs in 2008. Scott Nuttall heads the Global Capital Asset and Management Group, KKR’s fastest growing department. Former US Army general and CIA director David Petraeus joined KKR in 2013 to serve as the chairman of the Global Institute. Alex Navab is the co-head of KKR’s Americas Private Equity business and the head of the Media and Communications team in the US. Former general David Petraeus announces his employment at KKR
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