KKR & Co.Kohlberg, Kravis, Roberts & Company (KKR)

Headquarters: New York, N.Y.

The Company

Kohlberg, Kravis, Roberts & Co (KKR) is one of the oldest private equity firms having been founded in 1976, and is known for high-profile deals such as the hostile takeover of RJR Nabisco for $31 billion in 1989, inspiring the bestseller, Barbarians at the Gate. KKR continues to make headlines with announcements of leveraged buy-outs of well-known companies such as First Data and Dollar General. In the first quarter of 2007, KKR has announced more buyouts globally than any of its competitors.

According to the firm’s Web site, KKR has invested in 150 deals with a total aggregate value of $279 billion In 2006, KKR invested $6.9 billion in 12 companies and participated in about $104 billion of deals. It is raising $20 billion for its global buyout fund and related entities. It owns 35 companies with a combined $95 billion in annual revenue and more than 500,000 employees.

If KKR’s portfolio constituted one publicly traded corporation, it would hold spot No. 10 in the Fortune 500.

The Money Makers

The two remaining founding partners, Henry R. Kravis and George Roberts, are cousins and make all the key decisions about company transactions. Forbes lists them both as being worth $2.6 billion, tied for No. 107 among the richest Americans. 

Kravis.Kravis is credited with being one of the key architects of the leveraged buyout where substantial amounts of debt are used to purchase companies. James B. Lee Jr. of JPMorgan Chase characterizes him as “the Roger Clemens of the industry. He was a winner when he was 20 years old, and he is a winner in his 60s.” 

Printing Money

• In January 2004 KKR bought MTU Aero Engines from Daimler Chrysler for $1.8 billion with a total equity investment of $326 million. In June 2005, KKR floated MTU in an IPO and earned back $590 million while retaining 29 percent of the company. They sold their remaining stake in January 2006 for an additional $570 million, for a total return exceeding 250 percent.
• In April of 2004, KKR acquired mattress-maker Sealy Corp. for approximately $440 million in equity and $1 billion in debt. Although KKR invested only $440 million of its own money in the deal, during the next two years it got back more than $250 million (two special dividends, yearly management fees, a cancellation fee, and the sale of part of the company through an IPO) and still held a stake in the company worth more than $900 million.