KKR will set up a team of dealmakers who will specifically target more UK takeover deals, as the private equity “raid” on British companies reaches record highs.
The private equity giant has announced it will expand its global operations to include a new team of five British dealmakers who will focus on snapping up companies in the UK, the Financial Times first reported.
“The idea is to have a few more British people covering British companies from a relationship perspective than we have in the past,” Mattia Caprioli, co-head of KKR’s European private equity business, told the FT.
The move will likely raise alarm in the City of London, where traditional fund managers have spoken out against a recent private equity “raid” on UK business, after the first six months of the year saw dealmakers announce bids for UK-listed companies at the fastest pace in more than two decades.
But Caprioli seemed unfazed by the prospect of a backlash from shareholders over KKR UK takeover bids – and indeed expects it, because “that’s their job”.
This year’s frenzied period of buyouts has sparked a fierce row, as private equity dealmakers were accused of acquiring UK companies far too cheaply, taking advantage of depressed valuations in the wake of Brexit and the pandemic.
Private equity firms have announced 366 bids for UK companies so far this year – the most since records began in the 1980s, according to Refinitiv data.
“There’s more value at a high level in the UK than there is in other markets,” Caprioli told the FT, pointing out that FTSE 100 companies are still valued at a similar rate compared to their earnings as they have been for years – while valuations have comparatively risen in other countries.
The latest deal shakeup came at the weekend, when Morrisons agreed a £9.5bn takeover deal with a group headed by Fortress Investment Group, an American investment management company which has ties with Japanese conglomerate SoftBank, and included Canadian pension fund CPPIB and a unit of Koch Industries, KREI.
The total value of the deal is £9.5bn, with the group valuing Morrison’s equity at £6.3bn and including £3.2bn of net debt under the takeover. It forms the UK’s largest takeover since KKR bought Boots in a £11.1bn deal in 2007.
Wave of deals
A wave of recent private equity interest in the UK’s supermarkets prompted the chair of the parliamentary business committee Darren Jones to write to Andrea Coscelli, the chief executive of competition watchdog CMA, last week to check the “scope of [the CMA’s] regulatory powers” to investigate such bids.
“Given previous highly leveraged purchases of high street brands, which have ultimately resulted
administration, job losses and pension fund shortfalls, there is concern that regulatory bodies have
insufficient oversight or powers to intervene when new owners act irresponsibly,” Jones wrote.
In May, KKR agreed a £2bn takeover deal for FTSE 250 infrastructure investor John Laing – just two weeks after it announced its interest in the firm.
KKR’s new UK team will be dedicated to covering potential British deals as their main job, and the firm will upgrade its London office to a larger site at Hanover Square in Mayfair.