KKR Gets Record $13.9 Billion for North American Buyout Fund

  • Firm, employees commit $1.4 billion to KKR’s 12th fund
  • Apollo, Carlyle, Silver Lake also in midst of fundraising

KKR & Co. amassed $13.9 billion for its latest private equity fund, the most ever raised for a buyout pool focused on North America.

The firm gathered the maximum $12.5 billion agreed to with investors and added $1.4 billion from its balance sheet and employees, according to a statement Monday from New York-based KKR. The fund, its 12th focused on the region, will target traditional buyouts as well as minority stakes, growth investments and toe-hold positions in public companies, KKR said.

Private equity firms raised $589 billion of capital in 2016, according to Bain & Co.’s global private equity report published last week. While that’s 2 percent less than in 2015, the industry has continued to raise more than $500 billion every year since 2013 as investors seek to redeploy money returned to them from profitable buyout deals.

Advent International finished collecting $13 billion last year after just six months in the market, topping its $10.8 billion predecessor fund. Thoma Bravo, which focuses on software and technology investments, closed on $7.6 billion in September, double the size of its previous fund. And software-focused Vista Equity Partners has received billions of dollars in demand beyond the $8 billion target for its latest fund, people with knowledge of the process have said.

Big buyout firms aren’t showing signs of slowing down. Silver Lake is seeking $12.5 billion for its fifth main fund, people familiar with the matter said in December, and Apollo Global Management LLC has started collecting commitments for its next global private equity fund, which is expected to match or exceed the size of its current $18.4 billion pool. Meanwhile Carlyle Group LP executives have said they plan to raise $100 billion for various funds from 2016 to 2019.

Add-On Deals

While KKR’s new pool is the biggest ever focused on North America, according to data compiled by Bloomberg, peers such as Apollo and Blackstone Group LP have raised bigger funds that invest in buyouts globally. KKR’s 2006 fund gathered $17.6 billion and made investments in North America, Europe and Asia.

The firm’s North American private equity team, led by Alex Navab, last gathered $9 billion from 2011 to 2014 for its 11th fund. That pool was generating an 18 percent annualized return after fees and was valued at 1.4 times cost as of Dec. 31, according to a KKR regulatory filing.

As firms raise larger funds and deal prices have followed equity markets higher, dealmakers have been forced to become more creative in the ways they’re deploying money. Investing through existing portfolio companies, by making add-on acquisitions for the businesses, is one way KKR is finding value, Navab said in a telephone interview.

“One of the things that we’re finding, particularly in markets where it’s hard to deploy capital as a standalone buyout, is that companies in our portfolio need capital to acquire businesses in their industry and create synergies,” Navab said Monday. “Over the course of the next year or two you’ll see a number of our portfolio companies acquire small and large entities in their industries.”

KKR’s balance sheet had committed $1 billion to the new fund, called KKR Americas XII, as of Dec. 31. KKR has the biggest balance sheet among peers and uses the cash hoard to start new investment strategies, make strategic acquisitions and co-invest alongside clients in funds and deals.

Since its start in 1976, KKR has produced annualized returns after fees of 19 percent in private equity, exceeding Blackstone’s 15 percent since 1985 and Washington-based Carlyle’s 18 percent since 1987, according to regulatory filings. Led by co-founders and cousins Henry Kravis and George Roberts, KKR managed $129.6 billion in private equity holdings, credit assets, real estate and hedge funds as of Dec. 31.

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