Established in 1976 and led by co-founding members Henry Kravis and George Roberts, Kohlberg Kravis Roberts & Co. is a leading global alternative-asset manager. The core of the KKR franchise is sponsoring and managing funds that make private-equity investments in North America, Europe and Asia. KKR has completed buyout transactions that are among the largest and most complex in history. In the last 31 years, the firm has generated total returns (realized and unrealized value as of March 31, 2006) of over $74 billion on over $30 billion of invested capital. Investors include corporate and public pension plans, financial institutions, insurance companies and university endowments.
Investment Philosophy
KKR's approach to making private-equity investments focuses on achieving large multiples of invested capital and attractive internal rates of return by selecting high-quality investments that may be made at attractive prices, applying rigorous standards of due diligence when making investment decisions, implementing strategic and operational changes that drive value creation in the businesses its acquires, carefully monitoring investments and making informed decisions when developing investment exit strategies.When making private-equity investments, KKR seeks out large capitalization companies with strong business franchises, attractive growth prospects, defensible market positions and the ability to generate attractive returns. KKR does not participate in hostile transactions that are not supported by a target company’s board of directors.
The firm's acquisitions take many forms. In the past, KKR has taken publicly listed companies private, acquired divisional assets through corporate divestiture transactions, partnered with family-owned businesses and strategic buyers, and purchased and grown companies through industry-consolidation strategies.
The firm's deals, though far from formulaic, share some basic features: KKR provides equity dollars and borrows money for the friendly acquisition of a business with predictable cash flows and strong management. The capital structure of the acquired business depends on the strategy for value creation, which is jointly developed by management and KKR. Over time, the firm exits investments through initial public offerings, secondary offerings and sales to strategic buyers.
Management Strategy
Once KKR acquires an industry-leading company, its primary goal is to work with management to grow and improve the business – creating shareholder value. KKR works closely with management teams to define strategic priorities and develop operating budgets and encourage its portfolio companies to invest for future competitiveness, improve operating efficiencies, make strategic acquisitions and incentivize employees by giving them ownership in the business. KKR establishes clear monitoring guidelines to measure a portfolio company's performance and frequently meets with members of management to review the company's financial and operating results and strategic priorities.An advantage of KKR ownership is that it is a patient investor, and its relationship with portfolio companies is generally long term. KKR typically holds investments for several years, and in some cases, the company has held them for more than a decade.
KKR believes that, over the long term, effective ownership and management of a company leads to benefits for all of its stakeholders – employees, customers, suppliers, shareholders and the community. KKR encourages its portfolio companies to invest resources in each stakeholder group. Employees, for example, should be trained in ways that prepare them for better, more demanding jobs. And it encourages portfolio companies to contribute to the communities where they operate.
Investment History
KKR's history of landmark achievements in private-equity includes the first leveraged buyout in excess of $1 billion, several of the largest leveraged buyouts announced worldwide to date, the first buyout of a public company by tender offer and the largest leveraged buyouts completed or announced in the United States, the Netherlands, Denmark, India, Australia, Singapore and France. KKR has continued its history of innovation by establishing new debt and public equity strategies that leverage the power of its brand and the intellectual capital in its private-equity business.Other KKR portfolio companies include Alliance Boots plc, Avago Technologies, Inc., Biomet, Inc., Dollar General Corporation, First Data Corporation, HCA Inc., the Nielsen Company B.V., U.S. Foodservice and Yageo Corporation.