What is the future of private equity? If the direction of Kohlberg Kravis Roberts (KKR) holds a clue, it may start looking a lot more like Berkshire Hathaway, founding partner Henry R. Kravis ’69 said in a recent interview with BusinessWeek.
The cover story in the December 10 issue of the magazine (“Can KKR Make Like Berkshire Hathaway?”) reported that KKR is reshaping its playbook as a result of lessons learned from the financial crisis. Taking a cue from Warren Buffett MS ’51, the firm is positioning itself to become more cash-ready and nimble to complement its past strategy of leveraged buyouts.
Kravis, who has been the cochair of the School’s Board of Overseers since 2005, says the ability to make acquisitions and minority investments in any economic environment is a key strategy. To raise the cash to do that, the firm is expected to go public in early 2010.
“We’re not just a private equity firm,” he said in the article. “We’re an asset management firm. … If all you’re going to do is say you’ll buy 100% of companies, you’re passing up a lot of opportunities where you can make a lot of money.”
The firm is also building an in-house investment bank, placing more emphasis on minority stakes and joint ventures and adopting new management strategies to align with its expanding size.
“Our job today is to create value,” Kravis said. “Private equity, to me, is acting and thinking like an industrialist.”