KKR

"In 1988, the management of RJR Nabisco announced the MBO, encouraged by an investment bank's proposal. It later came to light that there was a secret agreement with M&A advisors that about two billion dollars in rewards would be given to the seven managers (themselves) if the MBO succeeded, and external directors also expressed support for the MBO. However, because the purchase price offered was too low, Mr. Kravis of KKR, a veteran LBO fund, angrily declared, "He intends to snatch RJR Nabisco at a cheap price!" and immediately announced a competitive TOB. Naturally, this TOB was hostile, but since it was offering a higher price than the MBO proposal, external directors had no choice but to approve it. As a result, KKR acquired RJR Nabisco for about twenty-five billion dollars in an LBO. This incident demonstrated that once a company is put up for sale, potential buyers come forward, and it gets sold to the highest bidder. In other words, the mission of a company is to maximize shareholder value. This acquisition amount was the highest in history at the time and was titled "BARBARIANS AT THE GATE" in books and movies. Mr. Kravis of KKR, a pioneer of hostile takeovers, became my role model."

"From there, he moved on to the investment bank Bear Stearns’ “corporate finance” department, dealing with corporate transactions, where his cousin George Roberts worked. The head of the department was Jerome Kohlberg, and as the eldest of the three, he would become the first K in KKR. While they were still at Bear Stearns, they developed a form of business that was named “leveraged buyout,” or purchase with financial leverage. The leverage was the loan, which made it possible to buy a larger company and thereby generate greater profit. Leveraged company purchases had been done before in various ways, but never in this structured way or with such a high proportion of debt. The reason why it is more effective to use borrowed money than your own capital is that interest on debt is tax-deductible."

"George Roberts and Jerome Kohlberg were significantly less extroverted, and they went home to their families when the day’s work was over. Kravis was also the most aggressive in business. He pushed forward when KKR in 1988 entered the legendary battle for RJR Nabisco, a large publicly listed corporate group that, among other things, sold cookies and cigarettes. At that time, KKR was the largest of the buyout firms and paid a record price of 25 billion dollars, a sum that would take ten years before anyone surpassed it."

"Historically, engineers have held the power in Swedish industrial companies, focusing on product development and staying at the forefront technologically. That’s how companies like Ericsson, SKF, and Alfa Laval conquered the world. When financial markets became more international in the 1980s and 1990s, demands on listed companies’ profitability increased, and the status of economists was gradually strengthened. The spotlight shifted instead to sales, marketing, and how best to utilize company capital. It was in this environment that the Swedish venture capital market emerged, with role models such as Permira in the UK and KKR and Blackstone in the USA."

"The magazine The Institutional Investor is celebrating its fortieth anniversary, and the room is full of stars, some with a slightly dimmer shine than others. Among those seated are the then ECB chief Jean-Claude Trichet, junk bond trader Michael Milken who was sentenced to prison for insider trading in the 1990s, as well as a number of heavyweight investors and finance people. During the dinner, one of the founders of the largest and first buyout firms, KKR’s Henry Kravis, stands up and gives a short speech. He talks about how his firm set the industry standard for fees in 1976. They didn’t really know what level to settle on, so they randomly chose to take 20 percent of the profit. — When I look back, you might as well have gotten 25 percent, he says with a laugh, directed at his colleagues."

"The Zlatan culture has elements of what KKR’s founder Henry Kravis describes when he says you have to be afraid, because “fear drives people to do great things.” The fear he’s talking about is the fear of not succeeding; you break boundaries to become a winner."

"The Zlatan culture has elements of what KKR’s founder Henry Kravis describes when he says you have to be afraid, because “fear drives people to do great things.” The fear he’s talking about is the fear of not succeeding; you break boundaries to become a winner."

"Ted Forstmann opposed junk bonds with an almost religious fervor. His financing apparatuses involved straight subordinated debt, and this resulted in a more conservative structure for his management and his investors. Nevertheless, Forstmann Little’s returns to its investors were remarkable, the equal of the KKR deals financed by Drexel and Milken’s junk bonds."

"If Seven and WesTrac was an arranged marriage, Stokes’s next proposal — that West Australian Newspapers should swallow the entire Seven Media Group — seemed more like a contortionist’s act. West Australian Newspapers was valued at $1.4 billion and Seven Media Group at $4.1 billion. Shareholders were nervous and some downright hostile to a related party transaction, but Stokes managed to persuade enough of them that Jonah could swallow the whale and would benefit hugely from the experience. Apart from a little indigestion, what could possibly go wrong? When Stokes had done the original deal with KKR in 2006 he had been able to take out $3.2 billion in cash, keep half the business and leave the joint venture holding all the debt. Now he was able to merge it back into the rest of his media interests and raise $1 billion in new equity to pay down the debt — and still maintain control. Seven West Media was born. It was one of the great coups of Australian business history."

"The deals came fast and furiously, but as I was looking at assets in central Europe, a lot of new faces started to appear among potential buyers. Instead of other lone capitalist raiders like me and one or two native banks, some of private equity’s biggest names, including the likes of KKR and Blackstone, were beginning to crop up. Auctions were getting crowded. Instead of four or five people bidding for an asset, there were now often as many as 14 or 15. It was becoming too competitive. Assets were going for the wrong prices and it was time to sell, rather than buy. So I began offloading businesses, selling the telecoms companies and the Bulgarian bank in 2007 for fantastic prices. We made a profit of €400 million alone on the sale of the Bulgarian telecoms assets to the equity arm of AIG, a US insurance group. And I started to look for a way out of the Icelandic assets."