KKR Keeps the Deals Coming

"Barbarians at the Gate" remains a fun read
by Ronald C. Hall/Editor-in-Chief
6/3/2014

"A billion here, a billion there, and pretty soon you're talking real money."- Misattributed (but why waste a good quote, right?) to longtime Senator Everett McKinley Dirksen

NEW YORK, N.Y. - KKR (NYSE:KKR) the owner of The Brickman Group and the soon-to-be owner of the ValleyCrest Companies (soon to merge with Brickman) is one busy investment company. 

As just about everybody reading this short piece knows by now, the merger of Brickman, headquartered in Rockville, Md., and ValleyCrest in Calabasas, Calif., will result in the creation of the green industry's first $2 billion company. KKR invests primarily through leveraged buyouts (LBOs) and specializes in private equity investments. 

But, in terms of a KKR deal, this one is somewhat routine, at least in terms of numbers. KKR can put together deals with staggeringly big numbers. For example, its 2007 $44-billion buyout of Texas-based power utility, TXU, remains one of the largest acquisitions of its kind in history. 

By contrast, with the acquisition of ValleyCrest this summer, KKR will have about $2.6 billion invested in the green industry; $1.6 billion from this past November's acquisition of Brickman and another $1 billion for ValleyCrest. 

Jerome Kohlberg, Jr., and his cousins, Henry Kravis and George R. Roberts founded New York-based KKR & Co. in 1976. (Kohlberg left the firm in 1987.) The three men had previously worked together at Bear Stearns. KKR is considered one of the pioneers of the leveraged buyout.

Some of you may remember KKR because of its celebrated LBO of RJR Nabisco in 1988. The bidding war (and the behind-the-scenes financial finagling) served as the material for the book "Barbarians at the Gate" by business journalists Bryan Burrough and John Helyar. Harper Collins rereleased the book in 2008, the 20-year anniversary of the deal that firmly fixed KKR as a bonafide "player" in the universe of high-stakes buyouts.

The book is considered by many as one of the best business books every written. It's certainly one of the most fun to read, given the personalities and egos of the protagonists. In 1993 HBO used the book as the source for an entertaining made-for-TV movie.  

Since venturing into the green industry, KKR has remained busy in other industries, as well.

As this short piece is being written KKR was in the process of acquiring Internet Brands for $1.1 billion. Internet Brands owns the websites like Lawyers.com, CarsDirect.com and ApartmentRatings.com. It gets most of its revenue from advertising. An affiliate of KKR announced in late May that it had snatched up Singapore-based Goodpack Limited in a $1.1 billion transaction. KKR has completed investments in more than 160 companies since its founding.

Not all KKR deals get done, though. Several weeks ago Treasury Wine Estates, An Australian wine producer, rejected its $2.85 billion offer

How well KKR's Brickman/ValleyCrest investment fares will be fascinating to follow. Obviously, its success will depend on how well Brickman/ValleyCrest executives can merge and integrate the management, administration and operations of Brickman and ValleyCrest into a single functioning whole. 

From a geographic standpoint, it would seem that the pairing of the two companies fills in a lot of attractive markets where either one or the other of the two companies were absent. But, there's considerable overlap as well in some prime markets, too.