Question

Please identify a private equity firm, hedge fund or REIT and explain in 1-2 pages what they do and and any information on their past performance.

Answer 1

It's very open ended question. I have put together my thoughts below. Please use this as a guiding force and supplement it with your own thoughts.

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KKR & Co. Inc ("KKR", "Kohlberg, Kravis & Robert") is a leading global private equity firm incepted by three ex Bear Stearns employees namely Jerome Kohlberg, Jr., Henry Kravis and George R. Roberts. The first letter of their last names were put together to obtain the name "KKR".

What they do?

• KKR is a global investment firm. It invests in the form of private equity, debt and structure debt & equity across industries, sectors and across geographies.
• They have investment managers team of around 375 professionals across 21 countries who are constantly screening the deals and potential investment opportunities.
• Once the deals are screened based on initial thresholds, the same are presented to their respective investment committees. The investment committee comprises of top notch investment professional, industry & sector experts, people of eminence in respective fields, and independent individuals with impeccable record.
• The investment committee in a way examines the credit worthiness and decides whether there is an opportunity to earn the kind of returns they have promised to their limited partners.
• They conduct an entire gamut of due diligence such as financial, accounting, tax, legal, to thoroughly understand the history of the companies they have shortlisted for investment.
• Once the deals are approved, they invest the money in the companies. Such companies are then called investee companies.
• KKR plays an active role in monitoring their investments. They usually take a board seat and are part of multiple monitoring committees of the investee company. They may also choose to work closely with the management and guide them in their strategy and planning.
• Once the investment has matured, they usually make exits through:
  • Sale of their shares in IPOs
  • Sale of their shares to other private equity players
  • Sale of their shares to the company or existing promoters
• Besides, they also participate in leveraged buyouts, acquisitions and taking over the distressed businesses. They have a Special Situation Group ("SSG") that usually takes over distressed assets or companies, changes the existing management, turns around the company and then sell them as whole or in parts.
• In fact, KKR rose to prominence for their buyout of RJR Nabisco way back in 1989. It was the largest buyout then.
• Besides, KKR also takes stake in listed companies.

Their past performance: Their past performance had been phenomenal. Some of the notable exits are mentioned below:

1. Capsugel Transaction: A manufacturer of capsules, pills and other drug delivery systems.
   1. KKR bought Capsugel from Pfizer in 2011
   2. Valuation at the time of entry: $ 2.38 billion
   3. Exit: Sale to Lonza
   4. Exit valuation: More than twice the entry valuation
   5. Investment period: 6 years
2. Gland Pharma exit: A generic pharmaceutical products company called Gland Pharma
   1. Entry in 2013
   2. 74% stake acquired for $ 200 mn
   3. Exit in 2017
   4. Exit by sale to China’s Fosun Group for over $ 540 mn
   5. Investment multiple of 2.7
   6. IRR of 28.2%