FPendant la majeure partie de cette décennie, la saga de Gardner Denver, fabricant de machines industrielles basé à Milwaukee depuis 1859, a été présentée comme une suite du film emblématique Oliver Stone en 1987, monde financier. Les ventes de ses pompes à huile et de ses compresseurs se sont effondrées, ses actions à la Bourse de New York ont faibli et, en 2012, des financiers opportunistes, désormais sous la forme d'un fonds de couverture, ont trouvé le changement. Enfin, l'administration a été mélangée, Goldman Sachs a supervisé une vente et une société d'achat géante de la ville de New York est devenue l'enchérisseur gagnant en 2013, en versant environ 3,9 milliards de dollars, dont 2,8 milliards. en nouvelles dettes. La seule chose qui manquait était que Michael Douglas insistait sur le fait que la cupidité était bonne. & Nbsp;
Mais quelque chose de drôle s’est passé sur le chemin menant au cliché des usines fermées, des petits employés et des marchandises courbées. Plus de 325 millions de dollars ont été investis pour moderniser le matériel, rendre les usines plus sûres et améliorer les opérations. Le nouveau financement a permis à l'entreprise de se développer dans les secteurs médical et environnemental. Son effectif de 6 400 personnes a augmenté de 5%, ses revenus de 15% et ses flux de trésorerie d’exploitation de 54%. Lorsque Gardner Denver est revenu au NYSE il y a près de deux ans, tous les employés de la société ont reçu un stock équivalent à 40% du salaire de base annuel, soit un total de 100 millions de dollars. "Si nous le faisons mieux, la société le fera mieux, ce qui signifie que les stocks croissent", explique Josh Shelle, superviseur de chaîne de montage âgé de 29 ans, qui a reçu une éducation financière, avec la permission de Gardner Denver, pour réfléchir davantage. en tant que propriétaire. "Tout le monde gagne." & Nbsp;
Cette intrigue de bien-être a deux réalisateurs improbables: Henry Kravis et George Roberts, le milliardaire cofondateur de KKR & amp; Co., le géant des capitaux privés compte désormais 200 milliards de dollars (actifs). "Vous ne pouvez pas acheter une entreprise et éliminer tous les coûts, ce n'est pas un modèle commercial durable", déclare M. Kravis, âgé de 75 ans, depuis sa salle de réunion privée à New York surplombant Central Park. "Si vous n'investissez pas dans de l'argent pour créer de nouveaux produits, de nouvelles usines et de nouvelles façons de faire des affaires dans de nouvelles régions, vous mourrez." Roberts, 75 ans, son partenaire de longue date, ajoute: "Les entreprises qui" se soucient d'eux et de l'administration qui s'en soucie auront de meilleures performances ".
Les étudiants en histoire financière peuvent maintenant retirer leurs mâchoires du sol. KKR a bien sûr popularisé l’achat avec effet de levier dans les années 70 et 80 et est devenu le visage de la conquête de Wall Street sur les entreprises américaines. Toujours connu sous le nom de "barbares", d'après le grand livre de vente relatant l'acquisition de RJR Nabisco pour 25 000 millions de dollars, KKR a été interrogé par le Congrès pour éviter les taxes et l'utilisation agressive de la dette tout en avalant RJR et d'autres géants. sociétés telles que Wometco Enterprises et Beatrice Foods.
George Roberts (izquierda), Henry Kravis (derecha). Los cofundadores de KKR dicen que se pelearon por última vez a los 7 años. Hoy en día, ambos valen $ 5.6 mil millones.
KO SASAKI
Kravis, who grew up in Tulsa, got his start working for the closed-end Madison Fund in New York, which controlled a railroad operator called Katy Industries and used its tax losses to make acquisitions. While getting his M.B.A. at Columbia, he canvassed the Southeast for oil service companies to buy. When Roberts moved up the ranks at Bear, he recommended Kravis to look at Kohlberg’s buyout invention. In 1969, the three joined forces, running a small group at the investment bank, with Kravis based in New York while Roberts moved to California. After about a dozen successful deals, they set out on their own in 1976.
Read The Full Timeline of Henry Kravis, George Roberts and KKR
They were just in time for Michael Milken and the Drexel Burnham Lambert junk-bond money machine. Kravis and Roberts were buying large companies outright: Beatrice and Safeway in 1986, Owens-Illinois a year later. Duracell, Stop & Shop and RJR at the apex of the debt-fueled 1980s. Kohlberg balked at the aggressive model and was pushed out in 1987, and Kravis and Roberts, particularly the former, became synonymous with the buyout era after the publication of Barbarians at the Gate.
KKR’s transformation began before the 2008 financial crisis, surprisingly with one of its worst deals, for the Texas-based power producer TXU. The $45 billion buyout, inked in February 2007, was controversial from the start because of TXU’s expansion plans in coal. As KKR and its partners cut the deal, they reached out to the Environmental Defense Fund, an advocacy group that got McDonald’s to stop using polystyrene containers. Kravis and Roberts were interested in the connection between environmental efficiency and profits.
Within a year of closing TXU, KKR and the nonprofit formalized a pioneering “green portfolio” partnership in which KKR would rigorously track its companies’ waste, greenhouse gas emissions, water consumption and use of toxic materials. Within five years, the conservation efforts saved its portfolio companies nearly $1 billion, most notably at retailer Dollar General, which saved $775 million alone—or 6 million tons of waste—and was one of the crisis era’s most successful buyouts, making KKR 4.5 times its money. “Twenty years ago I wasn’t a big believer in ESG [environmental, social and governance]. I thought the most important thing is if you make good money for the company, all stakeholders will benefit,” Kravis says. “I’m a convert.”
Helping its portfolio companies became a top priority for the firm. To that end it expanded its in-house consulting arm, KKR Capstone, which now has 66 consultants advising the portfolio of companies on growth plans, acquisitions and cost savings. To spot risks, KKR has added teams to study global macroeconomics, technological disruption and political change.
"Clients want to invest in firms where they think people are doing right for the world and not ones that are destroying the planet, or the workforce."
In 2010, a Chicagoan named Pete Stavros was made head of KKR’s industrial buyout division. Stavros, now 44, the son of a Greek-American construction worker and a first-generation college graduate, believed productivity and profitability would increase if you gave equity to hourly workers on manufacturing lines, truckers and other nonexecutive employees. At Harvard Business School, Stavros dedicated his thesis to the benefits of employee stock ownership. He put his idea in play at KKR, giving 20,000-plus workers $500 million of equity in the eight deals his group has done.
Gardner Denver is a shining example. The stock is up 73% since its IPO in May 2017. When Stavros's team cut a deal to merge Gardner Denver with a larger rival, a further $150 million was given to workers of the new combined company. All told, the $4 billion of equity Stavros and his team have invested in their eight industrial buyouts, including Capsugel, Capital Safety and CHI Overhead Doors, is now worth over $12 billion. “This is a different way of operating. You need to be willing to engage with people in a different way,” Stavros says. “Treat them like business partners.”
Few cases illustrate Stavros’ thesis better than KKR’s experience with Toys “R” Us. Acquired for $6.6 billion in 2005, the retailer wound up filing for bankruptcy in 2017 and shuttering its U.S. stores in 2018. Rather than simply lick its wounds and walk away, as KKR might have 30 years ago, the firm and its deal partners contributed $20 million to a severance fund set up for former employees.
“Clients want to invest in firms where they think people are doing right for the world and not ones that are destroying the planet, or the workforce,” says Mason Morfit, chief investment officer of the hedge fund ValueAct Capital, KKR’s largest outside shareholder.
While the amount invested in the Toys “R” Us severance fund was trivial for KKR’s partners, the fact that its large pension investors, like the state investment boards of Minnesota and Washington, insisted they do so wasn’t.
KKR’s transformation isn’t only about doing good. It’s also about fees, which today are on a scale that makes RJR Nabisco’s $390 million in deal fees look quaint.
Take the firm’s push into credit, which plugged up a giant hole in its capabilities. Fifteen years ago, KKR was still fairly one-dimensional and lacked a fixed-income operation that would allow it to lend funds to companies for restructurings and acquisitions. The firm’s credit business now stands at $66 billion in assets. Despite losses in its alternative debt and its CLO business last year, KKR kicked off some $400 million in credit management and transaction fees in 2018.
The creation of an underwriting business has been another fee bonanza. “Between 2005 and 2007, we paid The Street almost $5 billion in fees, and we didn’t get much back for it except we were invited into a few auctions,” Kravis says. So Scott Nuttall, the firm’s co-president, built an in-house underwriting business for KKR’s portfolio companies, which underwrote 204 debt and equity offerings in 2018 and generated $631 million in fees.
KKR’s fee revenues climbed 19% in 2018 to $1.8 billion, including more than $1 billion in so-called transaction and monitoring charges, which the firm earned for, among other things, management advice to its portfolio companies. There were also $147 million in reimbursements for expenses and $60 million in consulting fees.
Remember the feel-good IPO of Gardner Denver in 2017? After charging the company $3.4 million a year on average in transaction and monitoring fees, KKR levied a special onetime termination fee of $16.2 million in conjunction with its IPO. High fees translate to generous compensation for KKR partners. Last year the firm paid out an eye-watering $1.5 billion in compensation to its 1,300 staffers.
deuxièmey far the biggest innovations at KKR have been structural. A few years ago, on a plane ride back to California, Roberts made a revealing calculation: Had KKR been able to hold on to its investments in perpetuity, it would have a bigger market capitalization than Berkshire Hathaway. To that end, in 2006 KKR was the first major U.S. buyout firm to tap public stock markets, raising $5 billion of permanent capital in Amsterdam to invest in its own deals. When shares in that public vehicle, KKR Private Equity Investors, plunged from $25 to below $2 during the financial crisis, Kravis and Roberts knew that many of their deals (like Dollar General and Hospital Corporation of America) were undervalued, trading for pennies on the dollar. So the partners shrewdly folded KKR’s core operations into KKR Private Equity Investors and listed the new entity on the New York Stock Exchange. Since asset prices recovered, KKR’s permanent capital has swelled to $14 billion and seeded its fundraising expansion into new sectors like infrastructure, real estate, healthcare and technology.
The new capital was also used to buy 35% of Marshall Wace, a quantitative hedge fund whose assets have since doubled to nearly $40 billion, and to resuscitate KKR’s investment in the payments processor First Data, which now stands at $1.5 billion on the firm’s balance sheet after a 67% surge in its stock price over the past year. “We made lemonade out of some lemons,” Roberts says. “I have respect for our competitors, but none of them have the mousetrap we have.”
Last year, KKR’s overhaul strategy culminated with its conversion from a partnership into a corporation, eliminating the need for complicated K-1 tax filings by its public shareholders. This change, plus an earlier one, which fixed its dividend payout to a modest percentage of aftertax earnings (currently 13%), ensures that the firm will retain more profits than its competitors. It will also likely make its stock more desirable to a larger population of institutional investors. “We wanted to have the power of compounding,” Kravis says, emboldened by the fact that KKR now holds $10.7 billion of its investments on its balance sheet. “If you think about Warren Buffett, who has never paid a penny out in dividends, and you look at how much capital he’s been able to accumulate and the value of Berkshire today, it’s really impressive. We can do the same thing.”
Among old-guard private equity giants, KKR was the first to formally announce lines of succession, naming Scott Nuttall, 46, and Joseph Bae, 47, as co-presidents and granting each $121 million in stock awards in 2017. Nuttall is a familiar face to public stockholders and is the driving force behind KKR’s expansion in credit and capital markets. Bae oversees the firm’s core global buyout business, which includes a big expansion in Asia as well as real estate and infrastructure. The firm’s business in Asia now spans eight offices and $20 billion in assets.
“When you look at the complexity of what we do and how we operate around the world, you need two people,” Roberts says.
The rich stock grants to Bae and Nuttall have caused grumbling inside the firm, when you consider that KKR has since significantly reduced stock compensation to staffers in what may be a maneuver to reduce share dilution and bolster the stock price. The performance of KKR stock, like that of other PE firms, has been underwhelming. Over the past five years it has returned on average just 5% annually, underperforming the S&P 500’s 12% annualized gain.
Of course, the hard part will be maintaining KKR’s entrepreneurial DNA as it expands as a corporation.
Some of its newer ventures have already run into trouble. In 2012, KKR bet on hedge funds via a fund-of-funds business, buying $8 billion (assets) Prisma Capital Partners, only to see its performance languish. An $884 million natural-resources fund, raised in 2010, lost most of its value. Between 2012 and 2014, KKR raised over $5 billion in special-situations funds that have produced annual net returns of 3% or lower.
The hard part will be maintaining KKR's entrepreneurial DNA as it expands as a publicly traded corporation.
During much of the 1980s, KKR’s dealmakers could fit in single boardroom.
“If you think about what this firm was, it basically was started with three guys and a broom—Jerry, George and me,” Kravis says. By 1996, when KKR’s heirs, Nuttall and Bae, joined the firm, it employed about two dozen investors. Now dealmakers number 447, and two thirds of the firm’s 1,300 staffers don’t invest, instead tending to tasks like back-office, tax and legal.
With its growing pains have come notable departures: Recent exits include David Liu and Julian Wolhardt, two top investors in Asia, and Alexander Navab, the former head of its U.S. buyout business, each now raising multibillion-dollar funds elsewhere.
Despite all the changes at KKR, Kravis and Roberts show no signs of slowing down—and are especially excited about prospects in Asia. Under the stewardship of Korean-born Bae and New Zealand-born Nuttall, KKR is building entire new businesses in the region.
According to Kravis, Japan is littered with cheaply priced conglomerates loaded with underperforming assets. He recalls asking the CEO of one of Japan’s big trading companies how many subsidiaries the company owned. The Japanese executive said 2,000. When Kravis asked how many were core, the answer was still 2,000.
“I would have had a better conversation with a glass, but we got along just fine,” Kravis says. In April KKR gathered its 75 partners for its annual meeting in Tokyo.
“I’ve been going to Japan since 1978. I always saw the light at the end of the tunnel. Now it’s real,” Kravis says with a youthful glint in his eye. Roberts adds, “Japan today reminds me of the 1960s and 1970s in the United States.”
Only this time the nice guys at KKR will have to resist the urge to slash and burn, and instead figure out a way to buy and build.
Cover Photograph: Ko Sasaki for Forbes.