KKR in 2003
Ravi Madapati
Faculty Member
Icfai Knowledge Center
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The Road Ahead
It had been the experience, ingenuity and resources of KKR that had set the
firm apart. KKR was in the business of identifying compelling investment
opportunities and acting as a catalyst to bring together the right people and
the right financial and operational resources to create substantial value for
its investors and management-partners. In 2003, though KKR believed that its
capabilities had never been greater, it looked thin on management talent even
as competition had intensified. Kohlberg had left the firm in the mid-1980s
after developing serious differences of opinion with his two younger
colleagues. Kravis and Roberts were approaching 60. KKR was facing an acute
shortage of good people. It had just 12 partners and 28 other executives. In
contrast, firms like Carlyle and Blackstone, each of which employed more than
400 people could assign dozens of executives to each transaction.
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KKR had tried to make up for its smaller size with
greater attention to detail. The 10 partners other than Kravis and Roberts
were on average 45 years old. Scott Stuart, 43, and Ned Gilhuly, 42,
served on the firm’s investment committee[1] with Michael Michelson, 51,
Kravis and Roberts. KKR no longer controlled the LBO business or
intimidated its rivals like it once used to. As the number of attractive
deals decreased, buyout firms were sharing takeover targets. LBO firms
were raising funds much more quickly than they were able to invest them.
Caught amidst the vagaries of the market and the shrinking pie of
potential acquisitions, KKR seemed like it was past its prime. The dearth
of deal-flow was looming like a large black cloud on this once invincible
firm’s horizon.¨ |
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References
1. Loomis, C J, Buyout Kings, Fortune, July 4, 1988.
2. Burrough, Bryan, Helyar, John, The Barbarians at the Gate, The Fall of RJR
Nabisco, Harper Collins, 1989.
3. Greed Really Turns Me Off, Fortune, February 2, 1989.
4. Jaffe, Thomas, KKR Hits an Oil Slick, Forbes, October 12, 1990.
5. Solo, S; Aquilera-Hellweg, M, The Inside Story of the Rise of KKR, Fortune,
March 3, 1991.
6. Dumaine, Brian; Loomis, Carol J, The Graying of KKR, Fortune, July 27, 1992.
7. Hylton, Richard D, Welsh, Tricia, How KKR Got Beaten At Its Own Game,
Fortune, February 5, 1994.
8. Schifrin, Matthew, Weinberg, Neil, Milk for Cigarettes, Forbes, October 10,
1994.
9. Matlack, Carol in Moscow, with Kranz, Patricia in Naberezhnye Chelny and
Nathans Spiro, Leah in New York, Was Henry Kravis Outfoxed in Russia?,
BusinessWeek, August 11, 1997.
10. Reed, Stanley “KKR is Seeking Greener Pastures” BusinessWeek, April 3,
2000.
11. Sparks, Debra, The Return of the LBO, BusinessWeek, October 16, 2000.
12. Fanelli, Christa “KKR and UBS Warburg for Zumtobel” Buyouts, February 5,
2001.
13. Sherer, Paul M “KKR, Hicks Muse Joust with Anschutz Over Regal Cinemas”
Wall Street Journal - Eastern Edition, March 23, 2001.
14. Jackpot, The Economist, June 7, 2002.
15. “Accel and KKR in technology venture” European Venture Capital Journal,
September 2001.
16. Whitestone, Randy, KKR: Fewer Deals, Same Swagger, Bloomberg Markets,
December 2002.
17. MacFadyen, Ken “KKR, Trimaran Plug into Transmission Company” Buyouts,
December 16, 2002.
18. The Case for Going Private, The Economist, January 25, 2003.
19. KM “KKR May Satisfy Appetite with Safeway”, Private Equity Week, February
3, 2003.
20. MacFadyen, Ken “Bell Canada Enterprises’ Directories Unit by Kohlberg
Kravis Roberts & Co. and Teachers’ Merchant Bank” Buyouts, February 18, 2003.
21. Thoughts on a Quarter Century, KKR, from www.kkr.com.
22. Grundfest, A Joseph, The Leverage of Ideas, KKR from www.kkr.com.
23. Corporate website of KKR, www.kkr.com.
[1] This committee made all the investment decisions.
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September 2003, All Rights
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