Over the last three decades, KKR, a leading global alternative asset manager has made

significant accomplishments through its private equity investments.

KKR has developed in depth industry knowledge and excellent relationships in both business
and political world to tap into businesses with leading market positions. KKR has acquired
businesses across a wide portfolio and unlike other PE firms, has followed an integrated
approach to every investment leveraging the collective insight and knowledge of all of its
executives. In addition to pension funds, loans and bonds, KKR puts its own money in each of
its investments and utilises the expertise of its in house consulting unit – Capstone, to
implement and drive operational improvements. Collaborating with the acquired firm’s
management team KKR’s senior advisors and Capstone group drive the value creation process
through a 100 day plan focusing on:
Growth in earnings
Cash maximization
Market exit premium
Post acquisition, KKR’s integration process involves either retaining or replacing the
management team along with the addition of its senior advisors to the management board. On
occasions, it has also changed the organisation structure to align with the modified business
strategy. While KKR has been successful with most of its acquisitions, it has faced stiff
challenges in the form of management revolt, higher premiums, and inability to syndicate
loans resulting in failed acquisitions.
On the whole, KKR’s success over the years can be attributed to its flexibility, innovation and
emphasis on integrated value creation processes mostly. After having established itself in
developed economies, with its scale and reach, KKR is well positioned to dominate the PE
world in developing economies.

Sourcing Business Opportunities

KKR’s global network of business relationships and internal deal generation strategies is
arguably the most important source of their proprietary investments. KKR continues to
develop and leverage its deep expertise in 14 primary industry groups, long-lasting
relationships with business leaders world-wide and established strong relationships with
financial and government leaders to tap into potential opportunities.
2.3 Funding
Our research reveals that KKR has demonstrated extreme flexibility and adaptability in terms
of structuring the acquisitions.
On a broader level, KKR has distinct private equity funds which focus
on opportunities in diverse geographies.While KKR 2006 Fund invests primarily in North
American Businesses KKR Asian Fund focuses on Asian businesses and KKR European Fund III
and KKR E2 Investors invest across Europe. Typically these funds receive support from pension
funds, endowments, and foundations which provide the majority of the capital. More than 40
state and local public pension plans, representing more than 20 million members, have
committed nearly one-half of the capital raised for their funds.5
At the business level, whilst KKR’s preferred approach to acquisition seems to be teaming up
with other PE firms and investors, for instance:
HCA (Hospital Corporation of America) in 2006 (KKR + Bain Capital partners + Merrill
Lynch PE group)
 KION (MFG of Forklift trucks) in 2006 (KKR + Goldman Sachs Capital partners)
It hasn’t hesitated to invest individually in some high growth potential businesses including
Aricent8 Technologies (India) in 2006 and First Data Corporation (US) in 2007.

Another noteworthy aspect is that while acquiring public companies, KKR usually sets up a
special purpose company on the target company’s exchange so as to delist the target company
and transfer shares to the newly listed subsidiary. For instance, KKR set up Precision Capital
Private Ltd (PCPL) to acquire MMI Singapore.
On the whole, our analysis indicates that irrespective of the type and nature of the acquisition,
KKR is remarkably efficient and focused on the management teams of the target firm. While
KKR has retained the existing management team when confident of their capabilities, they
have also replaced the members when in doubt including the CEO in case of FDC.

The value creation is kicked off by the 100 day plan which is formulated by the management of
the portfolio companies in consultation with the Capstone team which lays out the key
objectives and priorities to achieve the investment goals initially established. During this time
functions encompassing sales and pricing practices, procurement and manufacturing
capabilities are closely reviewed. This helps the management team to focus on key operating
priorities, performance objectives for the first 24 months after KKR ownership. The
management of the portfolio companies have access to the talent management group of KKR
which helps them in recruiting key personals to achieve the set targets. The Portfolio
Management committee (PMC) continues to monitor these companies to compare and
contrast the company performance as well as the day to day activities along with financial
planning. Therefore KKR follows more of a hands-on approach in helping companies achieve
shareholder maximisation.