“Henry Kravis and George Roberts built a financial conglomerate while they spent their lives dismantling those of others”

Losses & profits. Their common grandfather had fled Czarist Russia, established a grocery store in Indiana, was ruined by the Great Depression of 1929, and converted to oil in Oklahoma, with one obsession, “Be your own boss.” “. Henry Kravis and George Roberts have learned the lesson beyond all hope. Founders of KKR in 1976, with financier Jerome Kohlberg, they invented a profession, changed American capitalism and built one of the largest financial conglomerates in the country. The two cousins, 77 and 78, have announced their retirement. They will remain co-chairs of the board of directors but will leave the management to their lieutenants, chosen since 2017, Joe Bae and Scott Nuttall.

The latter find themselves at the head of a company present in private equity, the original business, but also infrastructure, real estate, insurance, finance. In total, 429 billion dollars in assets (or 371 billion euros) under management representing nearly 800,000 employees. All this power concentrated in a company of 1,200 people worth $ 50 billion on the stock market.

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This is the magic of leverage, invented in the 1970s by Jerome Kohlberg, who left KKR in 1985. It consists of buying a company with the maximum amount of debt, having them repaid by the profits of the company and resell it later at a profit. Risky practices which have earned the qualifier of “barbarians” to our two ambitious, named after the formidable book which tells the story of their assault on the conglomerate RJR Nabisco (Barbarians at the Gate, Bryan Burrough and John Helyar, Harper & Row, 1989).

Successors chosen well in advance

Ironically, they adopted for their own business the opposite of what they advocated for others and which made their fortune. They have built a veritable financial conglomerate as they have spent their lives dismantling those of others. They who changed the shirt of the managers of companies that they sold a few years after their acquisition, patiently built their own company and chose successors who had been in the company for twenty years a long time in advance.

Brutal on the outside, loyal and considerate on the inside, they brought their company to Wall Street after converting American capitalism to shareholder value and loathing a stock market deemed too lax with the bosses. With age, the invaders became gentrified, like their counterparts in Blackstone, Apollo or Carlyle. So it is with all barbarians.

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