The 'barbarians' are long through the gate but fresh tests of fortitude await KKR
From a small conference room near his office overlooking New York's Central Park, Henry Kravis is offering an appropriately expansive insight into how he views his place in Wall Street history.
People have long "bought assets by putting up a dollar and borrowing money", he says during a joint interview with George Roberts, his cousin and business partner. "People bought homes and small businesses this way. But we created something to enable this process to achieve a much larger scale."
Kohlberg Kravis Roberts, the investment firm the duo founded nearly 30 years ago, acquired RJR Nabisco, the food and tobacco company, for $30bn (￡17bn, �25bn) in 1989 - a buy-out of still unsurpassed magnitude, immortalised in a best-selling book and film as Barbarians at the Gate. Since then, KKR has continued to plough billions of dollars into companies around the world, generating gross profits of nearly $40bn for investors and the firm's partners.
From self-imposed "outsider" status on Wall Street, Mr Kravis and Mr Roberts have become part of the establishment. The technique they devised - which involves buying a company, loading it up with debt and selling it for a profit - has become an industry of its own, called private equity. And the two men, aged 61 and 62 respectively, say they are not even close to contemplating an exit. "Everyone has a clear understanding that George and I will continue to oversee the firm with the benefit of critical input from KKR senior executives," says Mr Kravis.
This determination to remain in control comes as KKR seeks to expand both in size and geographical scope. It will soon attempt to raise a fund that could be as large as $12bn - roughly the same size as the pool of money brought together last year by Steve Schwarzman's Blackstone Group, its nearest rival. At the same time KKR will be pursuing the next step in its global expansion: Asia.
Mr Kravis and Mr Roberts had shied away from a region where a number of western investment groups, such as Carlyle, Warburg Pincus and Ripplewood Holdings, have planted flags. KKR now hopes to prove that it has not arrived too late at the Pacific party.
Meanwhile, Messrs Kravis and Roberts will have to demonstrate that KKR's model has the flexibility to endure. Have the founding pair found the right balance between maintaining control and making room for a new generation of dealmakers? Is it enough for KKR to excel at its core buy-outs business while many of its competitors are also branching out into new products, such as hedge funds? The answers could determine whether KKR will maintain its reputation as private equity's biggest gun, along with Blackstone, or languish, its legacy that of a powerful pioneer rather than a lasting Wall Street institution.
While the environment for private-equity firms has never been better than it is today, there are doubts about the sustainability of the boom, as higher interest rates reduce the availability of cheap financing for acquisitions. There are also fears - which Mr Kravis and Mr Roberts reject - that some of the deals struck in the past year may have been too debt-laden, threatening a spate of bankruptcies.
The chemistry between the founding duo is flawless in spite of the differences in character between the more reserved Mr Roberts and the effortlessly charming Mr Kravis. Over the course of almost two hours, the men - natives of Texas and Oklahoma who attended university in California together before starting their careers in finance at Bear Stearns - often finish each other's sentences, embellishing and adding to each other's thoughts.
Many people close to the firm share their belief that KKR will remain successful. The group "is in as good a shape today as it has ever been", says Casey Cogut, a longtime lawyer for KKR at Simpson Thacher & Bartlett. "Henry and George have built a terrific organisation," says Lloyd Blankfein, president of Goldman Sachs. "They are part of the rarefied atmosphere at the top of the private-equity community and represent the kind of continuity and brand that anyone would envy."
Wall Street has not always been so bullish about KKR's prospects. During the late 1990s, a number of private-equity firms suffered but KKR was exceptionally hard hit after a few bad telecommunications investments and a disastrous foray into US cinemas. But rather than inflicting permanent damage, that period appears to have allowed the firm a rethink.
"That's when George and I sat down and said we've got to change the way we are doing business - now you are seeing the fruits of our labour," says Mr Kravis. At the time, KKR put into action a plan that involved reinvigorating Capstone, its consulting arm, which worked on the acquisition last March of Toys R Us, the toy retailer, and the 2004 purchase of Sealy, a mattress maker. In addition, KKR started hiring people, many from industry, with operating backgrounds. The most recent signing is Michael Marks, the former chief executive of Flextronics, the Singapore-based contract electronics manufacturer, who will help oversee technology investments.
The focus on operational expertise reflects a belief by Mr Kravis and Mr Roberts that as competition increases in the private-equity industry, the best returns will be achieved by firms with a more hands-on approach to the companies they own.
Beyond that, the duo also undertook a radical shake-up of KKR's internal structure. Mr Kravis and Mr Roberts relinquished their near-total control of decision-making and set up an investment committee of six KKR partners to ratify investment decisions and a 13-member portfolio committee to monitor how investments perform. "That has been a massive change in our culture," says Johannes Huth, a Europe-based partner who sits on the investment committee. "The business is becoming more formalised and more institutionalised. We are trying to identify what makes a good transaction and replicate that across the firm."
The economic structure of KKR has also evolved over the years, as Mr Kravis and Mr Roberts have been forced to allow younger partners to share more of the spoils of successful deals. The duo's share of the carried interest - profits shared by the partners once certain investment thresholds are met - is thought to have fallen under 50 per cent, in part reflecting the rising number of KKR partners. (Mr Roberts says only: "Henry and I have never had an increase in our ownership since we started 30 years ago.") After the addition of nine partners at the latest annual meeting last month, there are now 23 full-time KKR "members", as they are referred to.
"KKR has clearly widened the net and brought in a new group of managers - some of the most talented people in American business," says John Mack, Morgan Stanley chief executive.
While pushing through these changes, KKR was helped by successful deals in its current fund. Launched in 2000, the $6.1bn Millennium Fund has so far produced an unusually high gross return of 71 per cent, on investments that include PanAmSat, the satellite operator, and Texas Genco, the US utility (see right). Gains from this fund will add to the staggering amount that KKR has generated over time: by last September the firm had invested $22.5bn, converting it into $61.3bn. Of the resulting $38.8bn gross profits (calculated before the billions that KKR partners have taken), $10.6bn is unrealised, reflecting shareholdings in companies KKR still controls or part-owns.
"The bottom line is that they have made a lot of money for us over a long period of time," says Joseph Dear, executive director at Washington State Investment Board, one of the world's biggest private-equity investors.
Questions remain, however. Last September, fears that KKR had done too little to motivate younger staff surfaced very publicly when Scott Stuart and Ned Gilhuly, two long-time partners and favourites to succeed the founding duo, left to set up their own fund for public equity investments - just as Jerome Kohlberg, the other co-founder, had done in 1987.
But Mr Roberts rejects suggestions that they should have tried harder to keep Mr Stuart and Mr Gilhuly, saying: "Ned and Scott want to run their own business and make investments in midcap companies and bring their private-equity experience to those companies: that's not what we do."
Unlike peers such as Blackstone and Carlyle, which branched out into hedge funds, KKR has been reluctant to expand beyond its traditional business of executing buy-outs. Last year it carried out an initial public offering of KKR Financial, a small real estate investment fund. So far that is the extent of Mr Kravis and Mr Roberts' flirtation with other businesses and this is not expected to change. "For the immediate future, our focus is on our core competency, which is making good long-term investments in attractive companies," says Mr Kravis.
However, KKR is making bolder bets in its core business as it attempts to differentiate itself. For its push into Asia, it sent Joseph Bae, an up-and-coming dealmaker, to set up offices in Hong Kong and Tokyo and hired Sir Deryck Maughan, the former Citigroup executive, to lead the efforts and help navigate the region's political waters. "Those who are seen to be taking advantage of society will be rejected, so we have got to be sure that we are on the right side of things," says Sir Deryck, expressing a hope that KKR's "long-term investment philosophy will be attractive to many policymakers".
The drive into Asia follows its establishment of a London office only in 1999, in a move that many saw as tardy: there too, a number of KKR's US rivals had already crossed the Atlantic. Nonetheless, the European expansion generated a string of lucrative deals.
Aside from Asia, Messrs Kravis and Roberts have also identified technology as a target. Last year the firm participated in the $11.3bn buy-out of SunGard Data Systems and the $2.6bn purchase of Agilent Technologies' semiconductor business. But more than anything, the most famous duo in private equity say they will continue to rely on their combination of instinct, energy and experience.
"We've seen every cycle imaginable. We've seen inflation, deflation, high rates and low rates," says Mr Kravis. "If you get the proper financing, create the proper capital structure and understand how an industry works, you have the ability to withstand just about any kind of shock."
As KKR faces stiff new challenges, its founding fathers must hope those words prove not hubris but prophecy.
私人股本的成功模式再受考验
从他办公室附近的小会议室俯瞰窗外，纽约中央公园尽收眼底。就在这种宽阔的视野之下，亨利?克拉维斯（Henry Kravis）讲述了他如何评价自己在华尔街历史中的地位。
长期以来，人们“通过提供少量资金、其余部分依靠贷款的方式来购买资产”，他和表兄弟兼商业伙伴乔治?罗伯茨（George Roberts）一起接受采访时说。“人们以这种方式购买房屋和小型企业。而我们则开创出新的方法，使得这一过程获得更大的规模效益。”
这对投资伙伴在将近30年前成立了投资公司Kohlberg Kravis Roberts （KKR）。到1989年，该公司以300亿美元的价格收购了食品和烟草企业RJR纳比斯科（RJR Nabisco）――这宗收购交易的规模迄今未被逾越，并已载入一本名为《门口的野蛮人》（Barbarians at the Gate）的畅销书及一部同名电影而永垂青史。此后，KKR继续向世界各地的公司倾注数十亿美元，并为投资者和公司合伙人创造了近400亿美元的毛利润。
独特的投资方式
从一开始将自己置于华尔街“体制以外”，克拉维斯和罗伯茨到现在已成了华尔街体制内一员。而他们所设计的技巧――买下一家公司，用贷款举债，然后卖出获利――也已发展成为自成一体的行业，就是所谓的私人股本。现年分别为61和62岁的这对拍档表示，他们甚至从未有过退隐的打算。克拉维斯称：“每个人都很明白，我和乔治将得力于KKR高级行政人员至关重要的咨询意见，继续掌管着这家公司。”
在他们决定继续掌控公司之际，KKR正寻求扩充公司规模及业务覆盖的地域范围。该公司即将着手筹集高达120亿美元的资金，与其最接近的竞争对手、史蒂夫?施瓦茨曼（Steve Schwarzman）掌控的黑石集团（Blackstone Group）去年的筹资总额大致相当。与此同时，KKR还将继续展开其全球扩张的下一步骤：进军亚洲。
克拉维斯和罗伯茨曾经刻意避开这个卡莱尔（Carlyle）、华平（Warburg Pincus）和Ripplewood控股等众多西方投资集团早已涉足的地区。现在，KKR希望证明它参加这场太平洋大聚餐的时间并不太晚。
同时，克拉维斯和罗伯茨将必须证明 KKR模式具有持久发展的灵活性。这一对创始人能否在继续掌控公司以及为新一代生意新人创造发展空间之间找到平衡点？面对众多竞争者纷纷开始发展对冲基金等新产品，KKR专注于在其核心的收购业务领域精益求精是否足够？对这些问题的答案将决定KKR能否继续媲美黑石集团，保持其私人股本行业龙头老大的声誉，抑或逐渐萎缩，使其在华尔街的形象仅局限于一个强大的开拓者而非经久不衰的华尔街机构。
尽管私人股本公司当前正享受着前所未有的良好生存环境，但对这种繁荣能否持久的怀疑依然存在，因为不断攀升的利率降低了获得廉价融资并进行收购的可能性。此外，还有人担心过去一年中所达成的一些交易有可能负债过高，因而存在大量破产的风险――对此，克拉维斯和罗伯茨均断然否认。
投契的配合
尽管两位创始人的性格迥然不同――罗伯茨更为矜持，而克拉维斯则魅力四射，但他们之间的配合可谓完美无暇。在近两小时的采访中，二人经常接着讲完彼此没说完的话，并顺势扩展和补充对方的思路。他们分别生长于得克萨斯州和俄克拉荷马州，后来在加利福尼亚州一起上大学，毕业后又同在贝尔斯登公司（Bear Stearns）开始金融职业生涯。
许多熟悉该公司的人士也相信，KKR将能继续成功。在盛信律师事务所（Simpson Thacher & Bartlett）长期负责 KKR业务的凯西?考格（Casey Cogut）律师表示，该集团“现在的状态与以往任何时期一样出色”。而高盛（Goldman Sachs） 总裁劳埃德?布兰克费恩（Lloyd Blankfein）则表示，“亨利和乔治已建立了一个非常好的组织，他们已成为私人股本行业不可多得的高层次精英。他们代表着一种持续性和品牌，任何人都会感到羡慕不已。”
但华尔街对于KKR的前景并不总是这么乐观。20世纪90年代末期，多个私人股本公司曾遭受打击。在几项糟糕的电信业投资和进军美国电影院行业损失惨重后，KKR受到的打击尤为严重。但这段经历并没有对其造成永久性伤害，而是似乎给了公司一个重新思考的机会。
调整公司策略
克拉维斯表示说，“那时，乔治和我坐下来，并表示需要改变公司经营方式――现在，大家都能看到我们努力的成果。”当时， KKR开始实施一项计划，其中包括振兴旗下咨询子公司Capstone。这家子公司参与了去年3 月收购玩具零售商玩具反斗城（Toys R Us）以及2004年收购床垫制造商Sealy的交易。另外，KKR开始聘用具有运营背景的人士，其中许多来自工业界。最近招至麾下的包括新加坡合同电子产品制造商伟创力公司（Flextronics）的前任首席执行官麦克尔 ? 麦克（Michael Marks） ，他将帮助主管科技投资事宜。
对运营专长的关注反映了克拉维斯和罗伯茨的一个看法，即随着私人股本行业竞争的加剧，能够取得最佳收益的，将是那些对其拥有的公司更积极地以事必躬亲的态度进行管理的企业。
除此之外，两人还对KKR的内部组织结构进行了彻底改组。克拉维斯和罗伯茨放弃了他们几乎全盘掌控的决策模式，建立了一个由6位KKR合伙人组成的投资委员会负责投资决策以及一个由13人组成投资组合委员会以监管投资运作成效。“我们的文化发生了重大变化，” 投资委员会成员、公司驻欧洲的合伙人约翰尼斯?胡斯（Johannes Huth）称， “业务正变得越来越正规化和制度化。我们正努力寻找促成交易的好方法，并在全公司进行推广。”
再见成效
这些年来，随着克拉维斯和罗伯茨被迫允许较为年轻的合伙人分享成功交易带来的更多收益，KKR的利益架构也在不断演进。两人在附带权益（即投资目标完成后合伙人共享的利润）中的份额据说已降至50%以下，这在一定程度上反映了KKR合伙人数量的不断增长。（罗伯茨只是表示：“自从30年前公司创立以来，亨利和我对公司的所有权从未增加过。”）在上个月最新一次年度会议上新增9 位合伙人之后，现在被KKR称为“成员”的全职合伙人数达到23人。
“KKR明显扩大了网罗范围，引进了新一批经理人，其中一些是美国商界最有才华的人，”摩根士丹利（Morgan Stanley）首席执行官麦晋桁（John Mack）表示。
在推进这些变革的同时，KKR也得益于其现有基金的数项成功交易。价值61亿美元的千禧基金（Millennium Fund）创立于2000年，迄今已经产生了高达71%的总体回报率， 其投资对象包括卫星运营商泛美卫星（PanAmSat）和美国公用事业企业得克萨斯电力公司（Texas Genco）。这只基金的收益将令KKR长期以来创造的惊人业绩更加辉煌夺目：截至去年9月，公司累计投入的225亿美元变成了613亿美元。在这388亿美元的毛利润中（包括KKR合伙人从中抽取的大笔利润），未实现利润为106亿美元，这反映出KKR依然控制或部分持有一些公司的股权。
华盛顿州投资委员会（Washington State Investment Board）执行总监约瑟夫?迪尔（Joseph Dear）表示： “最根本的一点是，他们长期以来为我们赚了许多钱。”该委员会是全球最大的私人股本投资者之一。
高管流失
然而，还有不少问题存在。去年9月，由于KKR在激励年轻员工方面做得不够而引起了公众的担心。当时，两位长期合伙人、有望接替两位创始人的斯科特?斯图尔特（Scott Stuar）和内德 ?吉尔胡利（Ned Gilhuly）离开了公司，并设立了自己的公共股本投资基金，这种做法与1987年另一位公司创始人杰尔姆?科尔伯格（Jerome Kohlberg）的行动一样。
但罗伯茨反驳了有关他们应该更加努力挽留斯图尔特和吉尔胡利的说法，并表示：“内德和斯科特希望开创他们自己的事业，投资于中型公司，并将他们在私人股本行业的经验带到那些公司：那跟我们所做的不同。”
与涉足对冲基金的黑石（Blackstone）和凯雷（Carlyle）等同行不同，KKR一直不愿向传统的收购业务以外扩展。去年，它进行了KKR Financial的首次公开发行（IPO），这是一个小型房地产投资基金。这就是迄今为止克拉维斯和罗伯茨尝试其它业务的极限，预计这种情况不会改变。克拉维斯表示：“在近期，我们将焦点放在核心业务，即对具有吸引力的公司进行良好的长期投资。”
亚洲的吸引力
然而，当KKR试图独树一帜之时，它在其核心业务方面下了更加大胆的赌注。在进军亚洲过程中，它派出了大有前途的生意行家约瑟夫? 贝（Joseph Bae）在香港和东京设立办事处，聘请花旗集团（Citigroup）前高管德里克 ?莫姆爵士（Sir Deryck Maughan）领导该业务，以及帮助把握该地区的政治脉搏。德里克爵士表示：“那些被认为占社会便宜的人将会被排斥，所以我们必须确保站到正确的立场上。” 他希望KKR的“长期投资哲学将对许多决策者具有吸引力。”
在进入亚洲之前，KKR只是到1999年才成立了伦敦办事处。许多人认为，KKR进入欧洲过于迟缓：一批KKR 的美国竞争对手早已跨过了大西洋。尽管如此，该公司向欧洲的拓展还是带来了一系列有利可图的交易。
除了亚洲，克拉维斯和罗伯茨还将科技行业作为进军目标。去年，该公司参与了对SunGard Data Systems价值达 113亿美元的收购交易，并以26亿美元购买了安捷伦科技公司（Agilent Technologies）的半导体业务。但无论怎样，这对在私人股本业最著名的二人组表示，他们将继续依赖自己的直觉、精力和经验。
“我们经历了所有能够想象的每个经济周期。我们经历过通货膨胀、通货紧缩、高利率和低利率等，” 克拉维斯表示，“如果你能获得适当的融资，建立适当的资本结构并了解一个行业是如何运作的，你就有能力经受住任何的冲击。”
随着KKR面临严峻的新挑战，这两位创始人一定在希望他们上述语言最终证明并非傲慢自大，而是一种预言。
