If at first you don't succeed, try, try again. A spate of new hires has left buyout giant KKR looking more corporate and less clubby, signaling an IPO could be in the cards once more. The firm filed a form S-1 with the SEC a year ago, but before it could follow through with a public offering, it was derailed by the credit crisis. As the process gathers momentum again, is this an IPO you should be tracking?
First among equals
KKR has many firsts to its name, but it won't be adding IPO to the list. That title belongs to Fortress Investment Group (NYSE:FIG), followed by The Blackstone Group (NYSE:BX). Displaying brilliant timing (or luck!), they completed their stock market listings at the tail end of the huge buyout boom that ended last summer.
(KKR can take solace from the case of the investment banks. Of Merrill Lynch (NYSE:MER), Morgan Stanley (NYSE:MS), Lehman Brothers (NYSE:LEH), and Goldman Sachs (NYSE:GS), Goldman was the last to go public. It was worth the wait -- over the last five years, only Goldman shares have produced any significant positive return.)
Why go public now?
There is no official word from KKR on an IPO, much less a planned date. However, in creating an ownership currency, an offering is central to cementing an orderly succession there. In 2005, KKR lost two potential heirs in Scott Stuart and Ned Gilhuly, who left to start their own buyout firm.
Henry Kravis, 64, and George Roberts, 63, want to avoid a repeat of that scenario and they recently handed some key managerial responsibilities to two of KKR's most promising executives.
Good for KKR, but is this a win-win for you?
So what is your interest in all this? On Friday, I wrote that investment banks are run for the benefit of their employees first and their shareholders second; I think the same applies to private equity firms.
If you're excited about investing in KKR, you need to get excited about the concept of "margin of safety." KKR is a wonderfully profitable enterprise for its members and fund investors, but public shareholders need to be mindful of price, failing which they'll be staring at a bad case of "great company, lousy investment."
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