Iconic Private Equity firm Kohlberg Kravis Roberts i.e., KKR, has appointed two executives to succeed co-founders Henry Kravis and George Roberts, in what the FT dubs is a "rare move for an industry where succession plans have not been set out publicly."
KKR announced on Monday that it had named Joseph Y. Bae and Scott C. Nuttall, long rumoured to be favourites to fill the founders’ shoes, as its co-presidents and co-chief operating officers. The appointments will task Nuttall, 44, and Bae, 45, with essentially running the $137 billion firm on a day-to-day basis. Kravis and Roberts, both of whom are in their early 70s, will continue to lead the group as co-chairmen and co-chief executive officers. This is the first time KKR has openly indicated clear successors to the founders.
“Today’s announcement is about the future and ensuring we have the right team and leadership structure to serve our clients and partners for decades to come,” Mr. Kravis and Mr. Roberts said in a statement.
Continue reading the main story. In naming their successors, Kravis and Roberts are joining other buyout titans in preparing for the not too distant day when they step away from the business.
Kravis and Roberts said: “Having joined the firm together over 20 years ago, Joe and Scott have a strong foundation of trust, professional respect and personal friendship that is critical for success.
Henry R. Kravis, right, and George R. Roberts in 2001
“They think and act globally, they embody KKR’s core values, and they are two of our most accomplished business leaders, with proven track records of managing large teams, building new businesses and driving value for our fund investors and our public unit holders.”
As the NYT reports, other PE firms have already laid out their succession plans: Blackstone has long had an heir apparent in its real estate chief, Jonathan D. Gray, a lifer at the investment giant. Warburg Pincus long ago named Joseph P. Landy and Charles R. Kaye as its chief executives., taking over from the co-founders Lionel I. Pincus and John Vogelstein.
Preparing for succession is not always an easy task. Carlyle hired Adena T. Friedman from Nasdaq in 2011 as its chief financial officer, setting off speculation that she would one day lead the private equity titan. But she left three years later to return to Nasdaq, where she finally took over as chief executive in November. And it had hired Michael Cavanagh, a much-lauded executive at JPMorgan Chase, only for him to leave the firm for Comcast a year later.
The FT adds that "the move will add pressure to other buyout groups, whose founders are reluctant to relinquish power, to outline their own succession plans."
Private equity investors have grown increasingly concerned about succession with just 12 per cent of funds set to close in less than a decade.
The worry has intensified as limited partners — pension plans and other institutions that lock up their capital in private equity vehicles for years — cut back on under-performing managers.
But for Kravis and Roberts, the anointment of potential successors is perhaps more notable than for most. The men, cousins who co-founded Kohlberg Kravis 41 years ago, helped put private equity on the map.
The pair led the firm’s pursuit of RJR Nabisco and earned the immortal sobriquet “barbarians at the gate.” Since then, the private equity industry has largely shed its reputation as uncouth raiders and become an enormous industry, with some $820 billion in uninvested capital as of Dec. 31, according to Prequin. In recent years, the two men have praised the firm’s growing bench, with Mr. Kravis once saying that any of 15 executives could lead the firm should he and his cousin retire.
As for the new KKR executives, they will have different areas of primary responsibility, KKR said: Nuttall will concentrate on corporate and real estate credit, capital markets, hedge fund and capital raising businesses together with the corporate development, balance sheet and strategic growth initiatives. Bae will focus on global private equity businesses and real asset platforms across energy, infrastructure and real estate private equity.
Of the four major private equity titans that are publicly listed: K.K.R., Blackstone, Carlyle and Apollo Global Management, the share price of K.K.R. has performed second-best, rising almost 50% over the past 12 months.