Henry Kravis and George Roberts hand over the transformed KKR
Nuttall and Bae, who started at KKR in their twenties, now need to convince investors that the company can thrive in its new incarnation, as a company less interested in home runs than in steadily growing its business base. ‘assets and the penetration of new markets.
KKR’s presence in the financial industry is so pervasive that even its rivals have a stake in its success. “George and Henry have been great role models and mentors to everyone in the industry,” said Egon Durban, Co-CEO of Silver Lake. “Joe and Scott have what it takes to be able to take KKR to extraordinary new heights in the years to come.”
The heart of KKR remains the private equity business which has acquired at least 400 companies worth more than $ 650 billion since Kravis and Roberts, cousins who studied together in the 1960s at Claremont. Men’s College, left investment banking to set up a new type of finance establishment in 1976.
Their radical approach to business ownership “is one of the reasons the American corporate sector has become so successful and profitable over the past 40 years,” said Steven Kaplan, a private equity expert who teaches at the Booth School of Business at the University of Chicago. .
Overseen by demanding KKR executives, business leaders who once ran their businesses as personal strongholds have now found themselves on a leash. Another form of discipline has been imposed by billions of dollars in financial debt loaded onto corporate balance sheets.
KKR even dug into the operational details of the companies it owned, creating Capstone, an in-house consulting group to uncover efficiencies in everything from supply chains to environmental footprint.
KKR’s approach not only created a $ 4 trillion investment industry that transformed the way thousands of companies were run, but even affected the way publicly traded companies do business. “SOEs have been forced to respond to the pressure of debt buyouts and private equity by improving their corporate governance,” Kaplan said.
Despite all of its influence, KKR’s buyout arm now accounts for just over half of its $ 429 billion asset portfolio, as the company has grown significantly over the past 20 years to become a manager. diversified alternative investment.
The new co-CEOs have a proven track record of creating some of the company’s fastest growing companies.
Bae, 49, was responsible for expanding KKR in Asia in 2005, now one of the company’s fastest growing areas with more than $ 30 billion in assets. In recent years, he has also overseen much of KKR’s global investment platform, including its private equity operations in the United States and Asia-Pacific.
Nuttall, 48, led many of KKR’s most important strategic initiatives, including listing on the New York Stock Exchange in 2010 and building its $ 24 billion balance sheet, which now represents a significant portion of its value. Merchant.
He also developed KKR’s capital markets business, its expansion into credit investing where it now has $ 170 billion in assets, and led the July 2020 acquisition of annuity provider Global. Atlantic Financial Group, which increased the company’s insurance assets to around $ 90 billion.
Outgoing KKR executives highlighted the role their chosen successors have played in transforming their company into a diverse financial institution. “Joe and Scott. . . worked together and cemented a strong leadership team that has propelled the company to new heights, ”Kravis and Roberts said in a statement.
But at the same time as they were training a new generation of leaders, the founders sought to reshape their business to make it less dependent on people at the top.
In July 2018, the firm completed its conversion from a partnership to a corporation. Two years later, he eliminated a special class of shares that allowed insiders to veto the wishes of outside shareholders.
Monday’s leadership transition will be accompanied by additional company changes that will make KKR the companies it targets. It will withdraw its dual class share structure. After five years, all of KKR’s ordinary shares will vote on an individual basis, increasing the influence of shareholders on corporate matters such as its board of directors.
“I don’t think you need to find the next Henry Kravis or George Roberts,” said Gerald O’Hara, analyst at Jefferies, who covers alternative asset managers like KKR. “Alternative businesses are much more institutionalized than when they looked more like rough and tumble buyout stores when they were created.”
“The ultimate goal is inclusion in the S&P 500, ”added O’Hara. “The bottom line here is the continued evolution of alternative asset managers in the public domain.”
The increased grip of the public markets propelled the buyout company’s shares and made Kravis and Roberts, KKR’s two biggest shareholders, richer than ever.
KKR has returned 62% this year and has tripled since the start of 2019. On Monday, after Kravis and Roberts announced their departure, stocks approached a new high.