Book contents
- Frontmatter
- Contents
- Preface
- 1 The Rebirth of Financial Capitalism
- 2 Recasting the Role of Debt: Creative Leverage and Buyout Financing
- 3 Redefining Value in Owner-Managed Corporations
- 4 When Risk Becomes Real: Managing Buyouts in Distress
- 5 KKR as an Institutional Form: Structure, Function, and Character
- 6 Into the Mainstream: KKR in the 1990s
- Appendix
- Note on Sources for Financial Data
- Notes
- Index
3 - Redefining Value in Owner-Managed Corporations
Published online by Cambridge University Press: 05 August 2012
- Frontmatter
- Contents
- Preface
- 1 The Rebirth of Financial Capitalism
- 2 Recasting the Role of Debt: Creative Leverage and Buyout Financing
- 3 Redefining Value in Owner-Managed Corporations
- 4 When Risk Becomes Real: Managing Buyouts in Distress
- 5 KKR as an Institutional Form: Structure, Function, and Character
- 6 Into the Mainstream: KKR in the 1990s
- Appendix
- Note on Sources for Financial Data
- Notes
- Index
Summary
“When the deal is closed, the work begins.”
– Paul Raether, KKR partnerAs the buyout movement gained momentum, the public response was anything but friendly. “The perception,” said Robert Kidder, the CEO of Duracell, “is that buyout specialists are robber barons, that they come into a company, cut it to the bone, and then strip it of its vitality just to make money in the short term.” How else could it be? Leverage a company up to the hilt, and one had little choice but to sell off assets, cut jobs, and then run the remains into the ground. This kind of criticism reached a crescendo in the press and the halls of Congress toward the end of the 1980s, and KKR found itself right in the middle of the controversy. Stung by charges that they were plundering assets, KKR partners wondered how their intentions and track record could be so misconstrued.
To Michael Tokarz, the criticism defied common sense. Imagine, he said employing an analogy favored by KKR partners,
that like any other American, we go driving down the street looking at all the pretty houses. We see a house and we like it, so we pay the owner a premium price. Like every other American, we borrow money to do it. The average American puts down maybe 10–20 percent to buy a house – a highly leveraged transaction. We do the same thing. So now that we own this house, what do we do? We don't fix leaks? We don't paint it?
- Type
- Chapter
- Information
- The New Financial CapitalistsKohlberg Kravis Roberts and the Creation of Corporate Value, pp. 91 - 123Publisher: Cambridge University PressPrint publication year: 1998