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Henry Kravis’ Roller Coaster Journey Into Establishing the Multi-Awarded Global Investment Firm, KKR & Co.

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Henry Kravis had been destined for greatness from the start. Even though the road to success is a long and tumultuous one, but because of his wit and resourcefulness and his one-of-a-kind ability to turn something that has been drained of its value into something that can potentially be profitable and successful business. He is now a legend in the financial and business industry whom many young entrepreneurs look up to. With that said, let us look into the life of the man behind the KKR & Co. and maybe get some lessons from it.

Who Is Henry Kravis?

Henry R. Kravis was born on January 6, 1944, into a Jewish family in Tulsa, Oklahoma, the son of Bessie (née Roberts) and Raymond Kravis, who is a successful Tulsa oil engineer who had been a business partner of Joseph P. Kennedy ( Father of late President John F. Kennedy). Kravis began his education at Eaglebrook School in 1960, followed by high school at the Loomis Chaffee School, where he participated in student government and was elected vice president of the student council his senior year. He attended Claremont McKenna College (then known as Claremont Men’s College) and majored in economics. He graduated from Claremont McKenna College in 1967 before going on to Columbia Business School, where he received his MBA degree in 1969.

Kravis has been married three times. His first marriage was to Helene Diane “Hedi” Shulman but it ended up in divorce. They had three children together, one of whom Harrison died in a car accident in 1991. Kravis later married his second wife, the New York designer Carolyne Roehm (born Carolyne Jane Smith) in 1985, but the marriage, unfortunately, also ended up in divorce in 1993. Now, Kravis is currently married to his third wife, a prominent Canadian economist, and former columnist and TV personality in Canada, Marie-Josée Drouin. She sits on the boards of the Memorial Sloan-Kettering Cancer Center, the Robin Hood Foundation, and is the president of the Museum of Modern Art board of directors. They mainly live in New York City and have a seasonal residence in Palm Beach, Florida; he also owns homes in New York City; Southampton, New York; Paris; and Sharon, Connecticut.

KKR & CO.

After working at various jobs in New York City’s financial sector, he and his first cousin, George R. Roberts, joined the staff of Bear Stearns. Both Kravis and Roberts ended up working on a team at Bear Stearns that was headed by a contrarian investor named Jerry Kohlberg. Kohlberg focused most of his time on purchasing businesses that had debt and then fixing them up in order to sell them for much more than what the business was originally bought for. This strategy is known as a leveraged buyout (LBO), which at the time was called a “bootstrap” investment. Between the late 1960s and the mid-1970s, Kravis and Roberts worked along with Kohlberg to buy out a number of companies. One of their most successful acquisitions was Incom International in 1971. The company manufactured industrial parts and had a purchase price of $92 million. The acquisition brought in $950,000 in fees for Bear Stearns, which at the time was the largest amount they had realized in a single transaction. Kravis and Roberts both became partners at Bear Stearns at ages 30 and 31, respectively.

By 1976, tensions had built up between Bear Stearns and the trio of Kohlberg, Kravis, and Roberts leading to their departure and the formation of Kohlberg Kravis Roberts (KKR) in that year. Although the LBO deals were performing well, the management at Bear Stearns was not happy with the time it took for them to realize any returns from the acquisitions. As a result of this, they dismissed Kohlberg’s idea to create an entire LBO division at the firm.

In 1976, the trio founded an LBO firm of their own called KKR & Co. They successfully raised $400,000 of working capital to get the firm up and running. Early investors in KKR included the Hillman Family and the Griffith family (who are also large shareholders in MGM and Time-Warner). KKR conducted its first major buyout in 1979, a struggling auto parts manufacturer called Houdaille Industries that was acquired for $355 million. Over the years, KKR has acquired dozens of businesses.

In 1987, Jerome Kohlberg, Jr. resigned from KKR, and Henry Kravis and George Roberts continued to lead the firm. Under Kravis and Roberts, the firm was responsible for the 1988 leveraged buyout of RJR Nabisco. At a cost of $31.4 billion, it was then the highest price ever paid for a commercial enterprise. The publicity surrounding the event led to the story being dramatized in the book and film, Barbarians at the Gate. Kravis was portrayed in the film by actor Jonathan Pryce.

In early 1995, KKR divested its remaining holdings in RJR Nabisco, taking an overall loss on the deal. A journalist for the New York Times wrote a few years later that “the deal will go down in history as showing just how difficult it can be to get out of a huge deal that goes badly, and of the perils of putting too much money on one investment.” KKR pledged not to commit so much of its fund to a single investment again in the future. However, other investments proved more profitable, and the fund still did well overall.

The list of companies in which Henry Kravis’s KKR has invested over the years includes health care provider Hospital Corporation of America (HCA), TXU, Playtex, Beatrice Foods, Safeway, Toys “R” Us, Borden, First Data, and Regal Entertainment Group. A takeover of the battery maker Duracell proved particularly profitable. On December 24, 2013, KKR closed their first real estate-specific investment fund, which raised $1.2 billion of new money to invest. With additional funds from within KKR, the new fund provided over $1.5 billion to utilize.

The firm was listed on the New York Stock Exchange in 2010 and raised $1.25 billion from its initial public offering (IPO). Currently, KKR & Co. Inc. has a market cap of approximately $24.7 billion as of November 2019. And Kravis has an estimated net worth of $6.4 billion as of February 2020, and he is the 317th richest person in the world according to Forbes.

In July 2017, Kravis and Roberts announced that they would eventually be succeeded by Joseph Y. Bae and Scott C. Nuttall, who were named co-presidents and co-chief operating officers so that they might gradually take over daily operations.

Politics and Philanthropical Works

Kravis is a centrist Republican who has supported a variety of socially liberal causes and made significant donations to both Democrats and Republicans. He was a supporter and fundraiser for President George W. Bush and John McCain. He was also a major contributor to the 1992 re-election campaign of President George H. W. Bush. In 1997, Henry Kravis joined with Lewis M. Eisenberg to establish the Republican Leadership Council. In 2017, he also contributed $1 million to Donald Trump’s presidential inauguration. His lavish lifestyle has been criticized by activists looking to reform private equity regulations and restrict the practice of leveraged buyouts he pioneered.

The Henry R. Kravis Prize in Nonprofit Leadership, established in 2006, identifies extraordinary leaders in the nonprofit sector, celebrates their accomplishments, and shares their best practices with others. The prize is presented and administered by Claremont McKenna College (CMC) and Marie-Josée and Henry Kravis. Kravis is an alumnus and trustee of Claremont McKenna College. The Kravis Prize is affiliated with the Kravis Leadership Institute, a research institute at Claremont McKenna. A formal award ceremony celebrates the recipient’s accomplishments, and $250,000 is directed to a nonprofit organization designated by the recipient.

Kravis also funds the Henry Kravis Leadership Institute that sponsors the Leadership Studies programs at Claremont McKenna College, and the “Henry Kravis Internships for Teachers of Color” program. He has also financed the construction of extensive facilities at Middlesex School (Kravis House), the Eaglebrook School (Kravis Dorm), Deerfield Academy (Kravis Arena), and The Loomis Chaffee School (Kravis Hall).

He is a benefactor and a past chairman of New York’s public television station and sits on the board of the Metropolitan Museum of Art. A trustee of the Mount Sinai Medical Center, Henry Kravis and his wife donated $15 million to establish the “Center for Cardiovascular Health” as well as funding a professorship. They have also endowed the chair in human oncology at Memorial Sloan-Kettering Cancer Center in New York.

He previously co-chaired with Jerry Speyer the influential Partnership for New York City, founded by David Rockefeller in 1979, and now sits on its board of directors. He created the New York City Investment Fund, a non-profit organization to create jobs and new business in New York City.

He is a trustee of the Council on Foreign Relations in New York, Chairman of Sponsors for Educational Opportunity, and is a member of the executive committee of The Business Council for 2011, 2012, 2013, and 2014. He co-chairs the Columbia Business School Board of Overseers where he recently pledged a gift of $100 million to support the school’s new campus project and is a vice-chairman of Rockefeller University.

3 Tips From Henry Kravis

“I love the ability to work with very good managers, and to provide the right incentives for them, and truly become a partner with that management, and make that management take a long view.”

“I love the ability to work with very good managers and to provide the right incentives for them, and truly become a partner with that management, and make that management take a long view.”

“If you build that foundation, both the moral and the ethical foundation, as well as the business foundation and the experience foundation, then the building won’t crumble.”

“As I said there is nothing wrong with failing. Pick yourself up and try it again. You never are going to know how good you really are until you go out and face failure.”

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