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Henry Kravis: Deals
built 257 days ago
Kravis directly addressed criticisms that there is too much leverage employed these days to get deals done. He may not be a statistician, but he had some fascinating figures to prove that actually, more equity is being put up by private equity firms these days.
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As for a collapse of a fund, Mr. Kravis put that to rest with the following example: if Blackstone loses $1 - $2 billion on a failed deal, it will only impact a small part of their $88 billion under management. The carried interest will be affected by the netting effect, but the rest of the portfolio is made up of discrete businesses in different industries in diverse parts of the globe.
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Simply put, Kravis says that dealmakers will need to be creative. This means locating capital from alternative sources, such as private investors and hedge funds. There will ... be more minority investments.
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Mr. Kravis ... thought that a 1980s era deal would be paying at least 400 bps more for its debt package than you’d find today. Interestingly, Mr. Kravis said that the aggressivenes of the senior debt market is “both good and bad”.
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