KKR in 2003

            

Authors


Authors: Ravi Madapati,
Faculty Member,
ICMR (IBS Center for Management Research).



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The Road Ahead

It had been the experience, ingenuity and resources of KKR that had set the firm apart. KKR was in the business of identifying compelling investment opportunities and acting as a catalyst to bring together the right people and the right financial and operational resources to create substantial value for its investors and management-partners.

In 2003, though KKR believed that its capabilities had never been greater, it looked thin on management talent even as competition had intensified. Kohlberg had left the firm in the mid-1980s after developing serious differences of opinion with his two younger colleagues. Kravis and Roberts were approaching 60.

KKR was facing an acute shortage of good people. It had just 12 partners and 28 other executives. In contrast, firms like Carlyle and Blackstone, each of which employed more than 400 people could assign dozens of executives to each transaction.

KKR had tried to make up for its smaller size with greater attention to detail. The 10 partners other than Kravis and Roberts were on average 45 years old. Scott Stuart, 43, and Ned Gilhuly, 42, served on the firm's investment committee5 with Michael Michelson, 51, Kravis and Roberts. KKR no longer controlled the LBO business or intimidated its rivals like it once used to. As the number of attractive deals decreased, buyout firms were sharing takeover targets.

LBO firms were raising funds much more quickly than they were able to invest them. Caught amidst the vagaries of the market and the shrinking pie of potential acquisitions, KKR seemed like it was past its prime. The dearth of deal-flow was looming like a large black cloud on this once invincible firm's horizon."


5] This committee made all the investment decisions.