Dean Nelson, the KKR & Co. (KKR) partner who in 2000 started the firm’s internal consulting unit and grew it to 60 people globally, is leaving the firm.
Nelson, 54, will become a senior adviser and has been replaced by Bill Cornog, who previously ran European operations for the consulting unit, called KKR Capstone, the two executives at New York-based KKR said in an interview yesterday. Cornog said he will move to New York from London to assume responsibility for the group.
Henry Kravis and George Roberts, KKR’s co-chief executives, hired Nelson from Boston Consulting Group Inc. to build a group of consultants who could advise both the firm’s deal makers and the management teams of companies under KKR’s ownership. Capstone executives, based around the world, have worked on deals such as the buyout of retailer Dollar General Corp. (DG), which returned more than four times KKR’s money, as well as investments in Energy Future Holdings Corp. and First Data Corp., which KKR is carrying at 5 cents and 70 cents on the dollar, respectively.
Private-equity firms, which earn most of their money by buying companies and selling them three to six years later at a profit, have increased their use of consultants and operational executives as industrywide returns have declined. The net internal rate of return of the average 2008 fund was 8.2 percent as of June 30, compared with 14 percent for funds from 2003, according to data from research firm Cambridge Associates LLC.
“The financial side of a deal is so important and picking the right company is important, but that’s not enough,” said Nelson. “It’s increasingly focused on the operational side because there’s where I think you’re going to create the most value.”
Cornog said he wants to embed Capstone’s consultants with KKR’s investment teams more often so that the firm views deals from financial and operational perspectives equally.
“That tighter integration can continue to be our secret sauce,” Cornog said. “Not many firms have successfully addressed that yet.”
Nelson hasn’t decided what he will do next, though he said he is considering joining a private-equity firm that targets small to mid-sized companies. He also may tap his network to run a small to medium-sized company, he said.
“Dean has had a profound impact on the firm and our business model and his legacy will be a lasting one,” Kravis and Roberts said in an e-mailed statement.
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