Friday, September 28, 2012

Weekend Read: "The New Tycoons: Inside The Trillion Dollar Private Equity Industry That Owns Everything'

Bloomberg excerpts the book from Bloomberg press:

Kravis Shared DNA With Roberts Makes Buyout Men Unique
Ten thousand bucks.

Henry Kravis and his cousin George Roberts each scribbled out a check in that amount, smaller companions to the $100,000 draft their more established colleague, former boss and partner Jerome Kohlberg, had written.

That formed the entirety of the startup capital for what became Kohlberg Kravis Roberts & Co., known then unofficially, and now officially, as KKR. None of the three men would ever need to put any more money in. The two cousins would become billionaires several times over. Kohlberg would go on to create his own firm, Kohlberg & Co., based in suburban Mt. Kisco, New York, the following decade after disagreeing with the cousins on the strategy of the firm.

Today, the original bank documents hang framed near Kravis’s corner office on the 42nd floor of KKR (KKR)’s headquarters at 9 W. 57th St. in Manhattan. A gift from JPMorgan Chase & Co.’s Jimmy Lee, the matting features logos of companies KKR has bought in the intervening years, from Safeway Inc. (SWY) to Motel 6. Since Lee tracked down the documents, KKR has gone on to buy everything from Del Monte Foods Co. to Oriental Brewery Co. At three different points, it’s held the title of pulling off the biggest leveraged buyout in history.

LBO ‘Barbarians’
By dint of one of those deals, the $30 billion purchase of RJR Nabisco in 1989, KKR is the most famous of all the leveraged-buyout firms, at least by the measure of asking a random passerby or a relative over Thanksgiving dinner. The extraordinary details of that hotly contested deal gave rise to “Barbarians at the Gate,” one of the most compelling business stories of all time. The book, by Bryan Burrough and John Helyar, captured vividly the back-room dealings, egos and gamesmanship that people on Wall Street recognized as being all too accurate and everyone else reacted to with some combination of admiration and horror.

KKR’s New York headquarters are majestic. Security is tight, with a guard posted behind glass before a visitor can pull open the wooden doors that open onto a view of Central Park. The carpeted halls are lined with art from Kravis’s own collection, which tends toward the modern. His wife, Marie-Josée Kravis, curated what’s on display around KKR headquarters, picking from the Kravises’ wide-ranging art collection.
Creepy Clowns
While the corridors have mostly understated modern art, some of the meeting rooms feature more provocative pieces. There’s a small meeting room down the hall from Kravis’s office with two massive Cindy Sherman photographs hanging on opposite walls, from a series the artist did featuring what can only be described as creepy clowns. Vestiges of the earliest days are sprinkled throughout the offices of KKR, beyond the bank paperwork framed in the anteroom to Kravis’s office. In the small library adjacent to his office, where he holds most meetings, there’s a picture of Joe and Rose’s, the restaurant in midtown Manhattan where Kravis and Roberts had dinner right after they left Bear Stearns Cos. The site of the restaurant is now a Dress Barn.

Any conversation with someone who works or has worked at the firm, including the cousins, makes it clear that Henry and George together are running the show. There are no other major investment firms today beyond theirs whose figurative DNA is linked to actual shared DNA....MORE