KKR raises $4.6 billion for debut North American mid-cap fund, by Reuters

By Echo Wang

NEW YORK (Reuters) – KKR & Co (NYSE: ) raised $4.6 billion for its debut fund focused on mid-cap deals in North America, despite a difficult fundraising environment as rates high interest rates have dampened investors’ appetite for debt-driven buyouts, the US private equity firm told Reuters on Monday.

New York-based KKR, which had $601 billion in assets under management at the end of June, has sought to raise capital at a difficult time for large buyout firms to raise funds.

KKR also plans to raise $20 billion for its latest North American 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 companies refinancing to be difficult.

“We are in the context of a very difficult fundraising environment, but we exceeded our target and could have raised much more capital than the cap. It’s a real validation that we’re differentiated,” Pete Stavros, KKR’s global co-head of private equity, said in an interview.

However, private equity-backed deal volume is expected to rebound in the short term after the Federal Reserve cut US borrowing rates last week.

The global volume of private equity-backed buyouts rose 41 percent to $517.2 billion so far this year, according to LSEG data, as an improved financing environment spurred increased buyout activity.

The Ascendant fund, which launched in 2022 and is part of KKR’s private equity platform in the Americas, is its first dedicated fund exclusively targeting deals for middle-market companies in industries including consumer, financial services, healthcare, industrials, media and software.

The new fund, which was oversubscribed at the time of its closure, received backing from a range of investors including public pensions, family offices and insurance companies. The Ascendant fund has completed six deals so far for companies including software provider Alchemer, dental care chain 123Dentist and fire equipment provider Marmic Fire & Safety.

The latest move by KKR, which has traditionally focused on larger buyouts, comes as private equity firms increasingly look to take advantage of new opportunities due to a slowdown in larger volumes of leveraged buyouts .

KKR also committed to providing equity to senior employees of all its North American portfolio companies in the new fund. This is an incentive that the corporate world traditionally reserves only for senior executives.

This extensive employee ownership program was started in 2011 by Stavros in the company’s investments in the industrial sector and has since been expanded to North America and globally. KKR said more than 50 of its portfolio companies have so far provided billions of dollars in equity to more than 110,000 employees.

KKR said the program has led to higher revenue, improved productivity and lower turnover at portfolio companies. KKR co-founder and co-executive chairman Henry Kravis told the company’s investors in April that the employee ownership program has resulted in about $175,000 in additional revenue per employee at CHI, an overhead garage door business that KKR previously owned it.