Henry Kravis. File photo: REUTERS
Henry Kravis. File photo: REUTERS

US private equity firm KKR said on Monday it has elevated its co-presidents Scott Nuttall and Joseph Bae to co-chief executive officers, succeeding the storied firms billionaire co-founders Henry Kravis and George Roberts.

The transition has been in the works for years and is unlikely to surprise the firm’s investors. KKR had named Bae, 49, and Nuttall, 48, as co-presidents in 2017. KKR said on Monday that Kravis, 77, and Roberts, 78, would remain involved in the running of the firm as executive co-chairmen.

KKR’s shares have tripled in value and its assets under management and distributable earnings have doubled since Bae and Nuttall officially became Kravis’s and Roberts’s top lieutenants four years ago, KKR said.

Still, Nuttall and Bae face a high-stakes challenge in replicating the successful working relationship of the two cousins who started KKR 45 years ago. From having their names as part of KKR's acronym to fostering a close-knit culture of old-school Wall Street loyalty, Kravis and Roberts maintained a tight grip on the firm and helped shape the leveraged buyout industry.

KKR shares were up 0.8% at $66.05 in premarket trading in New York on Monday.

The move leaves Blackstone Group CEO Stephen Schwarzman, 74, as the only founder of a major publicly listed private equity firm not to have relinquished the role of CEO, though his No 2, president and COO Jonathan Gray, has been in line for years to succeed him.

In 2018, Carlyle Group Inc CEO Kewsong Lee took over from co-founders David Rubenstein, William Conway and Daniel D’Aniello, and Ares Management Corp CEO Michael Arougheti succeeded co-founder Tony Ressler. Apollo Global Management Inc co-founder Marc Rowan became CEO in March, replacing Leon Black who stepped down in the wake of scrutiny of his ties to the late financier and convicted sex offender Jeffrey Epstein.

Nuttall and Bae both joined KKR in 1996. Nuttall had previously spent less than two years at Blackstone, while Bae had a similarly short stint at Goldman Sachs Group Inc's principal investments group.

Nuttall helped take KKR public, a process that involved merging the firm with an Amsterdam-listed fund in 2009 and then moving the listing to New York in 2010. He has been a fixture on the firm's quarterly earnings call with Wall Street analysts and also ran KKR's capital markets, insurance, credit, hedge funds and fundraising initiatives.

Bae has been the main driver of KKR’s expansion into Asia, making the firm one of the largest US private equity investors on the continent. The Korean-American dealmaker also sat on the investment committees of KKR’s global private equity business.

By attracting money from some of the world’s largest institutional investors such as pension plans and sovereign wealth funds, KKR grew from a single $30m fund in 1978 to more than $429bn in assets under management now. These assets span private equity, real estate, corporate credit and hedge funds.

KKR first gained widespread recognition through its $25bn leveraged buyout of RJR Nabisco in 1988, a battle that was immortalised in the best-seller Barbarians at the Gate. Its investments include ride-sharing start-up Lyft, beauty products maker Wella and media group Axel Springer.

Kravis and Roberts have an estimated net worth of $8.6bn and $9.1bn, respectively, according to Forbes.

In addition to its leadership changes, KKR said on Monday it would take steps to eliminate its dual-class share structure. Carlyle was the first major publicly-listed private equity firm to do this 2019, followed by Apollo this year.

KKR said that its common shareholders will be able to vote on a one-to-one basis on all major important issues, including the election of board directors. It added that this will be achieved though a complex web of mergers of KKR entities to be completed by 2026.

Reuters 

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