The “Wall Street barbarians” hand over to KKR

Posted on Oct. 11, 2021, 7:10 p.m.Updated Oct 11, 2021, 7:46 PM

The “barbarians” of Wall Street are taking their leave. Henry Kravis, inventor of the LBO (leveraged acquisition of debt), made world famous by his $ 31 billion raid on RJR Nabisco in 1988, initiates his succession at the head of KKR. Founded in 1976, it is one of the oldest and most powerful American private equity funds.

With George Roberts, the last living co-founder – Jerome Kohlberg, the third financier who gave his initial to KKR, having died in 2015 – Henry Kravis hands over the reins to a new operational tandem. This one is not unknown. Appointed co-chairs in 2017, Scott Nuttall and Joseph Bae, aged 48 and 49 respectively, become co-CEOs.

“Over the past 25 years, Joe and Scott have played an important role in the current construction of the firm, its culture and our core markets. As co-chairmen, they worked together and cemented a strong management team that took the firm to new heights, ”said Henry Kravis and George Roberts, ruling out any rivalry at the head of the company. “We couldn’t be more elated than at this moment. There is such a need for private equity to support companies and KKR has so much potential, even 45 years later, ”they congratulated themselves.

After starting out with a total capital of $ 120,000, the two founders of KKR, who have become billionaires, do not however completely leave the galaxy of the American firm. As it crosses $ 430 billion, Henry Kravis and George Roberts, aged 77 and 78, will become its executive co-chairs.

Individual investors, a new frontier

The new duo at the head of the world’s number three in private equity, behind Blackstone and Apollo, will tackle the new frontier of private equity: individual investors. In the spring in front of his investors, Scott Nuttall estimated at 279,000 billion dollars the field of investment opportunities of KKR, 64% of which came from individual savers. “However, only 5% of their portfolios are directed towards alternative assets,” he stressed. “We’ve just scratched the surface of this space. We are convinced that this figure will grow and that we will be a central player in this movement, ”he added.

Scott Nuttall is also the initiator of KKR’s equity investment strategy, the most important of all its competitors, and which allows it to deploy its own balance sheet despite cycles. In the midst of the Covid crisis, this is the strong argument put forward by the firm to its shareholders. “During the 2008 crisis, KKR was a more concentrated firm and it did not have a balance sheet. Instead of the few hundred million during the financial storm, now we have over $ 20 billion. We have the capacity to invest in the opportunities that we want anywhere in the world, ”argued the leader.

More rights for shareholders

Under the aegis of the new tandem, KKR also announced another breakup. After giving up in 2018 its status of “partnership” to become a company like the others and attract more investors by being referenced in the indices, the firm will eliminate by 2022 another of its complexities: its structure of ‘double class actions. “All common securities will have one voting right per share on all matters usually submitted to shareholders, including the appointment of officers,” KKR said in a statement. “This reorganization should increase the rights of shareholders, and further align the interests of the current and future management of KKR with them,” the firm added.

On the stock market since 2010, KKR has since seen its stock grow 588% to $ 66.71 and crossed the threshold of $ 56 billion in market capitalization. When the succession was announced, the price rose another 1.8%.

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