Kohlberg Kravis Roberts & Co.

Definition

Kohlberg Kravis Roberts & Co. (KKR) is a global investment firm known for its expertise in private equity and leveraged buyouts. Founded in 1976, KKR revolutionized the mergers and acquisitions landscape by employing innovative financing strategies that allowed them to acquire large companies using significant amounts of borrowed money. Their approach has influenced many other investment firms and played a critical role in shaping the modern private equity industry.

5 Must Know Facts For Your Next Test

1. KKR is one of the pioneers of leveraged buyouts, making it a key player in the evolution of private equity finance.
2. The firm has managed investments in a wide range of sectors, including healthcare, technology, and consumer products, showcasing its diversified investment strategy.
3. KKR became widely recognized after its high-profile acquisition of RJR Nabisco in 1989, which was documented in the book 'Barbarians at the Gate.'
4. KKR utilizes a team-based approach to sourcing deals and managing portfolio companies, allowing for specialized expertise in various industries.
5. The firm also focuses on operational improvements within its portfolio companies, often driving growth through strategic management practices.

Review Questions

• How did Kohlberg Kravis Roberts & Co. change the landscape of mergers and acquisitions through its approach to leveraged buyouts?
  • Kohlberg Kravis Roberts & Co. significantly altered the mergers and acquisitions landscape by introducing leveraged buyouts as a dominant strategy. By using high levels of debt to finance acquisitions, KKR was able to purchase large companies that traditional investors might have found too risky. This approach not only led to greater deal sizes but also encouraged other firms to adopt similar strategies, thus reshaping the way private equity transactions are conducted.
• In what ways has KKR's investment strategy impacted various sectors of the economy since its inception?
  • Since its founding, KKR's investment strategy has greatly influenced several sectors by driving capital into areas such as healthcare, technology, and consumer products. Their focus on operational improvements and restructuring has often revitalized struggling companies, leading to increased efficiency and competitiveness within those industries. Additionally, KKR's ability to bring in management expertise has helped foster innovation and growth across its portfolio companies.
• Evaluate the long-term implications of KKR's approach on the private equity industry and potential regulatory changes that might arise from it.
  • The long-term implications of KKR's approach have been profound, establishing leveraged buyouts as a mainstream practice within the private equity industry. As these practices became more widespread, they raised concerns about excessive debt levels in acquired companies and the impact on employees and communities. This scrutiny could lead to regulatory changes aimed at ensuring greater accountability from private equity firms. Furthermore, as public perception shifts regarding corporate governance and responsibility, firms like KKR may need to adapt their strategies to maintain investor trust and comply with new regulations.

Related terms

Leveraged Buyout:

A financial transaction in which a company is purchased with a combination of equity and significant amounts of borrowed funds, typically secured by the assets of the acquired company.

Private Equity: Investment funds that buy and restructure private companies or engage in buyouts of public companies to delist them from stock exchanges.

Due Diligence: The process of investigating and evaluating a business or investment opportunity to confirm its financial, operational, and legal standing before completing a transaction.