A relentless global frenzy of deals totaling nearly $ 60 billion takes stock of KKR & Co.’s leadership – and a pause.
When the pandemic struck, soon after Philippe Freise and Mattia Caprioli took over new roles in Europe, the buyout company began deploying as much capital as possible while most of its rivals held back. More than a third of the total was spent in Europe, and KKR started working on a new fund dedicated to the region just a year after the last one closed.
The frenetic pace of transactions has taken its toll. KKR now echoes the softer tone adopted by investment banks as Goldman Sachs Group Inc. after employees balk at the work culture until you give up. The biggest challenge to high performance in the buyout industry is “constant burnout,” Freise, 47, said in an interview.
“As leaders of the new generation, our job is to really temper,” said the German dealmaker, who is co-head of KKR’s European private equity business with Caprioli. “It’s almost like conducting an orchestra where it all happened in ‘Ride of the Valkyries’ – we have to slow down a bit to protect the human element from being crushed.”
The unusually open tone of executives in the corporate buyout industry comes as workplace cultures come under increasing scrutiny and employers look for ways to retain a younger generation of workers. The pandemic has served as a brutal cocktail of more deals made in marathon video calls by lone workers at home. The priority now for Freise and Caprioli is to offer time to recuperate and make room for a more thoughtful investment approach.
They gave junior staff time off every Friday in November and December of last year, encouraging them to spend time thinking and reading. The duo also gave their rising stars responsibility for emerging trends such as medical technology and the future of work.
“I don’t think in the private equity industry 10 years ago people really saw it as their job to focus on management. They thought it was their job to go out and find deals, ”Freise said. “The future configuration of the private equity industry is to assemble, retain and manage high performing teams. “
Wall Street has been in turmoil this year with a leaked presentation from junior Goldman analysts detailing their punitive workload. Banks have responded by increasing wages, offering retention bonuses or offering benefits of platoon bikes at Apple gadgets.
The problem with buyout firms, like investment banks, is that employees have been working around the clock as the pandemic has created a plethora of trading opportunities. As Covid-19 spread around the world, KKR decided not to repeat its mistake of the financial crisis, when it remained largely on the sidelines.
It became a pivotal moment for KKR in Europe, where it had previously not deployed as much money as in other parts of the world. KKR has announced $ 19.6 billion in deals in the region since the start of the pandemic, from buyouts of listed companies to minority investments, according to data compiled by Bloomberg. He also scavenged assets from other private equity firms and occasionally barged in before rivals had a chance to bid.
“On the contrary, we missed opportunities that if we had had more capital available we would have done it,” said Caprioli, a 47-year-old Italian who previously worked in mergers and acquisitions at Goldman.
Just as the virus locks went into effect in March of last year, KKR bought Pennon Group Plc waste management arm for 4.2 billion pounds ($ 5.8 billion). He also acquired the Wella and Clairol Coty Inc. hair care brands in a $ 4.3 billion transaction.
Later in the year, KKR partnered with Cinven and Providence Equity Partners take Masmovil Ibercom SA private under a € 3 billion ($ 3.6 billion) deal and agreed to invest in the French hospital chain Elsan next to Ardian. Market dislocations have helped KKR buy some assets for 20-30% less than it would pay in a heated auction process, Freise said.
The company struck a deal in May to buy an environmental consulting firm ERM Group Inc. for $ 2.7 billion including debt. Days later, KKR announced it would buy the infrastructure developer John Laing Plc Group for about 2 billion pounds.
Caprioli sees more deals on the horizon, focusing on healthcare, sustainability, tech and the UK.
Success may require a new approach. Caprioli said he sees this moment as an opportunity to examine how KKR is recruiting, motivating and retaining talent. Earlier this year, he hired a former concert pianist as an operational executive in London to work with tech companies in his portfolio.
“We need people who deepen their thinking process,” he said. “These types of profiles, do you take them out of college, or can you find someone who has a sense of the streets? It’s an interesting challenge.
Freise, who previously helped found startup incubator Venturepark in Berlin, couldn’t build financial models when he joined KKR almost two decades ago as one of its first employees at London.
“A high performance team these days is very different from 10 years ago,” he said. “We have to be unconventional to ensure diversity of thought. “