KKR & Co., which rose to private equity stardom by buying and selling large companies, has lately taken interest in smaller technology and health-care businesses. Now it’s adding midsize industrial deals to the mix.
The buyout firm is partnering with Ron Voigt, a former executive at science and technology company Danaher Corp., to invest in manufacturing businesses generating about $25 million to $50 million in earnings before interest, taxes, depreciation and amortization. The effort will supplement the firm’s strategy of owning larger industrial companies and utilize the same team, led by sector head Pete Stavros. Voigt won’t be an employee of KKR, Stavros said in a phone interview.
Stavros said that while opportunities to buy big industrial companies do arise, he sees more consistent deal-making activity in middle-market industrial businesses. Tapping into that deal flow can give New York-based KKR the chance to effect change at an earlier stage and give itself and its investors exposure to the companies’ high growth rates.
“This will make us better investors,” said Stavros. “It gives my team more at-bats, they’ll develop faster and we’ll have more opportunities to access a virtuous circle of executive talent like Ron Voigt.”
The deals are expected to be funded by KKR’s North American buyout pool, which closed on $13.9 billion this year. Stavros said he anticipates the fund to do as many as five of the mid-market industrial investments.
The strategy will also give Stavros’s team a chance to continue testing an approach it calls the “employee engagement model,” which involves granting equity ownership to workers, investing in employee training and partnering with communities close to the companies. Stavros said those features, which appeal to the family-owned businesses that populate the industrial middle market, are a potential benefit as KKR embarks on finding new deals.
By Melissa Mittelman