We are pioneers. During the last three decades, we have built a global franchise, a broad investor base, and a diversified investment institution.

Our History

With backing from a handful of individuals and a single financial institution, First Chicago Corporation, KKR began operations on May 1, 1976 as a private equity firm specializing in leveraged buyouts. At that time, the notion of a buyout was not well understood. In fact, our founders, Henry R. Kravis and George R. Roberts, who had been buyout pioneers at Bear, Stearns & Co., helped educate others on the concept of these transactions.

From KKR’s perspective, a leveraged buyout involved our own and third-party equity dollars along with borrowed money for the friendly acquisition of a business with predictable cash flows and the potential for growth. We then spent several years working in partnership with a strong management team to increase a company’s value and would sell the investment and distribute profits to investors.

The Early Years

By 1977, we had completed our first acquisition (A.J. Industries) with capital raised from a small group of investors. This Los Angeles-based diversified manufacturer of transportation, military, and other products had a total market value of $26 million. Eight years later we sold the investment, providing superior returns to our investors. By 1979, the scale of our investing increased significantly — noteworthy was our fifth buyout of Houdaille Industries for $380 million. The transaction demonstrated how a well-capitalized buyout could cope with economic adversity. In the face of Japanese competition in the machinery market, technological change that rendered some of the company’s products obsolete, double-digit interest rates, and a deep recession, Houdaille never defaulted on any of its obligations and, in fact, the company’s value increased significantly. This was the first leveraged buyout of a mid-sized, publicly traded company.

As we moved into the 1980s, the scale of our investments increased even more and media interest in buyouts had become front-page news — particularly when well-known retail and consumer brands became KKR portfolio companies. These included Safeway Stores, the largest food retailer in the world (1986); Duracell, the world’s leading manufacturer of alkaline batteries (1988); and RJR Nabisco, a global leader in consumer products (1989) and until 2006 the largest buyout in history.

Expanding Our Focus

During our first two decades, we focused on building a leading private equity business. This initial focus was important in that it allowed us to develop and refine financial and structuring skills — skills that we believe are prerequisites for success in any investment business. Throughout the 1990s, we remained an active private equity investor, expanding into new industries and geographies. We invested considerable time and expense to develop the knowledge and relationships to acquire companies in complex, regulated industries such as banking, insurance, and power generation and transmission.

The New Millennium

In 2000, we began placing more emphasis on the operational aspects of our portfolio companies — an essential component for creating value. We organized our investment professionals into industry teams and charged them with becoming experts in their fields. We also changed our hiring practices and began recruiting people with a broader range of operational skills. We searched beyond Wall Street and hired many former CEOs and CFOs of leading companies, and had the management teams of our newly acquired companies work with our investment professionals and KKR Capstone on 100-day plans to improve company fundamentals. Since then, this operational approach to building value in portfolio companies has become the cornerstone of the way in which we evaluate and manage our equity investments.

In 2004, we began to actively pursue debt investments as a separate asset class. This started with the formation of KKR Financial Holdings LLC, a publicly traded specialty finance company. Through the management and operation of KKR Fixed Income, a wholly owned subsidiary of KKR and the external manager for KKR Financial Holdings LLC, we built a strong foundation to grow our current debt operations and KKR Financial Holdings LLC has expanded upon that. In 2006, KKR Fixed Income formed KKR Strategic Capital Fund, a private fund that enables us to take advantage of larger debt investment opportunities. This fund exploits debt-related KKR deal flow, market dislocations, stressed and distressed opportunities, focusing on concentrated positions in more than 15 target asset classes. Also in 2006, we formed KKR Private Equity Investors, L.P., a publicly traded private equity fund, to complement the capital in our private equity funds and allow a broader range of investors, both institutional and retail, to access our investment strategy and track record.