The Rewards of Venturing into Untested Waters
In more than three decades, Kohlberg Kravis Roberts & Co. grew from a pioneering startup to an indelible institution in private equity. Despite the entry of younger players, Kohlberg Kravis Roberts has never become irrelevant.
Its prominence arises from the fact that it was the company that contrived to make the leveraged buyout a convention. Until KKR came along, no one in business really gambled much on such untested transactions. Even Bear Stearns, the investment firm whence KKR’s founders hailed, intentionally overlooked buyouts. Seeing this untapped opportunity, cousins Henry R. Kravis and George R. Roberts, along with their mentor at Bear Stearns, Jerome Kohlberg, created KKR in 1976.
In no time, KKR was engaged in its first deal, raising $26 million to acquire A.J. Industries in 1977. Resold years later, it gave strong returns to KKR.
More milestones followed. In 1979, it bought Houdaille Industries in what was seen as the first buyout of an NYSE-traded company. For the first time in 1984, leveraged buyouts breached the $1 billion mark, with KKR’s takeover of Wometco Enterprises.
And then Kohlberg Kravis Roberts rose to greater heights — after weeks of legendary wrangling, the firm wrested control of RJR Nabisco. From 1988 until 2006, the deal was uncontested as history’s largest leveraged buyout.
Proving itself still viable, in 2007, KKR closed yet again the world’s largest management buyout, a $45-billion deal for TXU.
