This week two titans of the finance world, Henry Kravis and George Roberts, called time on their 45 year run at the top of high finance.
Kravis and Roberts were the second "K" and the "R" in KKR — the private equity giant that originally made its name, and their respective fortunes, in aggressive leveraged buyouts during the 80s and 90s.
Most famous of their deals is probably still the $25bn hostile acquisition of RJR Nabisco, a sprawling conglomerate that sold cigarettes and food, in 1989. That deal was immortalized by book Barbarians at the Gate, and was a rare mis-step in the history of KKR, which has otherwise delivered solid returns and has ballooned into a behemoth managing more than $400bn in assets.
Bread & butter
For years KKR's bread and butter was in private equity. Take money from investors, borrow some more from lenders and buy a private company. Try and make it more efficient (read: profitable), pay back the debt you borrowed and sell it on in 7-10 years, for more than you paid. That is a formula that's worked for 45 years, and will probably work for another 45.
But in recent decades KKR has expanded. Into public credit markets, real estate, other alternatives, hedge funds — and most recently insurance with the acquisition of Global Atlantic. The other formula that hasn't changed? Managing more assets = more fees.
