Monday, September 8, 2008

Plan Ahead

"We say to the management of companies: ‘You are here today. Where do you want to be five years from now, and how are you going to get there?’”

— Henry Kravis

Andrew Ross Sorkin and Julie Creswell authored a lengthy piece this past Sunday in the New York Times, entitled "What Does Henry Kravis Want?" Good question.

The gist of the article seems to be some extended head scratching about the private equity honcho's continued interest in taking his General Partner management company—the "KKR" which most people think about when they think about "KKR"—public through an initial public offering, notwithstanding the currently crappy market conditions for IPOs, leveraged buyouts, and bobbleheaded dolls bearing his own likeness or that of his partner George Roberts.

Like the Economist and other mainstream media reporters before them, Mr. Sorkin and Ms Cheswell profess to be confused by the fact that a private equity company would even entertain the thought of exposing its inner workings and private cafeteria menu to the withering gaze of the public markets and other riffraff. I, on the other hand, am confused by their confusion.

Perhaps they concluded that a gentleman of Mr. Kravis' abbreviated stature would naturally be particularly afflicted by the proverbial hobgoblin of consistency and were nonplussed when they failed to find it in his words and actions. But I could have told them that—"tiny eighties relic" or no—Mr. Kravis is by no means possessed of a little mind, and he and his partners and competitors in the institutionalized rape and pillage private equity industry have always had a complicated and situation-contingent love-hate relationship with the public markets.

Talented reportage or not, what amuses me is that the writers seem to have missed the very clue which could have enlightened them in the first place, a clue which they themselves drew attention to in the article. I speak, of course, of the quote from Mr. Kravis which adorns the top of this post, in which he alludes to KKR's standard practice of having their partner management teams develop extensive strategic, operational, and financial plans for the businesses which KKR buys with them. Surely Mr. Sorkin and Ms Cheswell did not think that a clever man like Mr. Kravis would fail to conduct the same simple planning exercise in his own personal and professional life?

Although, to be fair, reporters like Mr. Sorkin and Ms Cheswell would be unlikely to pursue this line of inquiry—even if it had occurred to them—without some sort of documentary evidence to back it up. Fortunately, your Dedicated Correspondent has access to a number of carefully screened, disgruntled current and former employees of KKR and other major PE houses to call upon for the manufacture discovery of titillating pieces of inside dope. A couple of phone calls and a kilo of cocaine later, and my sources delivered me a particularly revealing goody which shows just how far Mr. Kravis takes his own personal planning process.

The document is fragmentary, being just the first page of what appears to be a longer list, but I believe it speaks for itself:

Question answered, no?

Next time, Andrew, give me a call first, and I'll save you some shoe leather.

© 2008 The Epicurean Dealmaker. All rights reserved.