KKR closes its largest ever European buyout fund at $8 billion

(Reuters) -KKR & Co Inc said on Tuesday it had closed its sixth and largest European private equity fund at $8 billion, a significant boost for the investment firm at a time of market volatility and sinking interest in major acquisitions.

The fund will target investments into developed economies in Western Europe, capitalising on “structural trends” transforming the local economy including digitisation, sustainability and healthcare, KKR said in a statement.

Private equity firms have been forced to write larger equity cheques for their deals as debt financing for global mergers and acquisitions (M&A) dried up amid rising interest rates, high inflation and fears of a recession in major economies.

Last year, KKR chose to pay for its acquisition of French insurance broker April Group using only equity, with a view to arranging debt financing down the line.

Of the money raised for its latest fund, $1 billion was committed by KKR from its own balance sheet and employee commitments.

KKR said it is currently managing a little over $28 billion in assets on its European private equity platform.

“Raising this fund in the current market environment demonstrates the strong investor confidence in our European team and platform, and our long track record of delivering value and outstanding results,” said KKR partner Alisa Amarosa Wood.

Global private equity fundraising shrank last year, with the impact particularly felt in Europe, where there was a 30% decline from 2021, according to Preqin data.

Investor capital has flowed towards better-known names, with the 25 largest private equity managers concentrating 42% of global fundraising last year, the highest annual share since 2013, research by consultancy McKinsey & Company showed.

KKR’s fundraising also comes at a challenging time for buyout funds looking to realise existing investments, amid a scarcity of debt funding and pressure on valuations.

The value of European private equity exits plummeted 51% in 2022 to $78 billion, according to Preqin.

Law firm Debevoise & Plimpton LLP represented KKR as primary fund counsel for the fundraising.