KKR raises $4.6 billion for debut North America mid-market deals fund
2024.09.23 06:17
By Echo Wang
NEW YORK (Reuters) – KKR & Co (NYSE:) has raised $4.6 billion for its debut fund focused on mid-sized deals in North America despite a difficult fundraising environment as high interest rates dampened investors’ appetite for debt-driven buyouts, the U.S. private equity firm told Reuters on Monday.
New York-based KKR, which had $601 billion in assets under management as of the end of June, has been attempting to raise capital at a difficult time for fundraising for large buyout firms.
KKR is also planning to raise $20 billion for its latest flagship North America private equity fund, Reuters reported in June.
Some investors, or limited partners, have been reluctant to make new commitments to private equity firms, which have struggled to return capital as persistently high interest rates have made selling companies to other buyout firms or refinancing companies challenging.
“We are in the context of a really difficult fundraising environment, but we blew past our target, and we could have raised a lot more capital than the hard cap. It’s a real validation that we are differentiated,” Pete Stavros, KKR’s global co-head of private equity, said in an interview.
Private equity-backed deal volumes, however, are expected to bounce back in the near term, after the Federal Reserve cut U.S. borrowing rates last week.
Global private equity-backed buyout volumes have jumped 41% to $517.2 billion so far this year, according to LSEG data, as an improved financing environment has spurred increased buyout activity.
The Ascendant Fund, which was launched in 2022 and is part of KKR’s Americas private equity platform, is its first dedicated fund exclusively targeting deals for middle-market companies across industries including consumer, financial services, healthcare, industrials, media and software.
The new fund, which was oversubscribed at the time of its closing, received backing from a range of investors, including public pensions, family offices, and insurance companies. The Ascendant Fund has so far struck six deals for companies including software provider Alchemer, dental care chain 123Dentist, and fire equipment provider Marmic Fire & Safety.
The latest move from KKR, which has traditionally focused on larger buyouts, comes as private equity firms are increasingly looking to tap new opportunities due to a slowdown in larger leveraged buyout volumes.
KKR has also committed to offering equity to rank-and-file employees of all its North America portfolio companies from the new fund. This is an incentive the corporate world traditionally reserves only for senior executives.
This broad-based employee ownership program was started in 2011 by Stavros in the firm’s investments in the industrial sector, and was then expanded in North America and globally. KKR said over 50 of its portfolio companies have, so far, awarded billions of dollars of equity to more than 110,000 employees.
KKR has said the program has led to higher revenue, improved productivity and lower turnover at its portfolio companies. KKR co-founder and co-executive chair Henry Kravis told the firm’s investors in April that the employee ownership program resulted in about $175,000 of additional income per employee at CHI, an overhead garage door business that KKR previously owned.
