Return of the Mack – KKR Appoints Former Morgan Stanley CEO
It was announced on Tuesday that private equity firm KKR & Co (NYSE: KKR) has named ex-Morgan Stanley CEO John Mack as a senior advisor.
According to Bloomberg, Mack will join a roster put together by Henry Kravis and George Roberts that includes for Caterpillar (NYSE: CAT) CEO James Owens and Bertelsmann AG's former co-chairman Richard Sarnoff. This dream team will advise the company on investments.
“He will help make us smarter investors and strengthen our firm,” Kravis said in a statement.
The move seems to be an everyone's-a-winner situation. For Mack, 67, it is a relatively low-profile and low-pressure gig following his previous position with Morgan Stanley. He was chairman there for two years up until the end of 2011. Prior to that, he was CEO from 2005-2010.
KKR get another member of a quality financial-services team, something that other leveraged buyout firms are putting together in a bid to purchase businesses from banks when they are under pressure by regulators and markets to offload assets while the financial crisis is ongoing.
“The volatile economic environment has created a demand for both capital and operational expertise,” said Mack.
Mack might be just what KKR needs too. He was nicknamed “Mack the Knife” at Morgan Stanley thanks to the fact that he is quick to cut costs. His hard approach boosted businesses including trading, private equity and mortgages, although that strategy backfired in 2007 when the bank posted its first quarterly loss.
Perhaps a little ironically, Morgan Stanley published a research report on March 12, stating that KKR's substitution of a discussion on Capstone (its operational improvement platform), in place of a general investor day, highlights the importance of operations in driving strong fund returns.
“It's hard to ignore KKR's growth prospects in areas such as Real Estate, Credit, and L/S Equity, given the challenging flow environment for traditional asset managers. Keys to getting more positive include strong performance in first-time funds, expansion of LP base, and increased cross-selling results.”
Citi said that KKR Capstone focuses on leveraging deep business insight, including a network of 32 Senior Advisors, and deploys two to five executives on the ground to work side-by-side with management typically for 6-24 months. “KKR Capstone is involved with ~90% of KKR's portfolio companies. Even before a particular deal is consummated, Capstone assists in late-stage due diligence with deal teams and is actively involved with “day one” readiness.”
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