By Echo Wang
NEW YORK (Reuters) – U.S. private equity firm KKR & Co. said on Monday it has raised $4.6 billion for its first fund focused on mid-cap deals in North America, despite a tough fundraising environment where high interest rates have dampened investor appetite for debt-fueled buyouts.
New York-based KKR, which had $601 billion in assets under management as of the end of June, is trying to raise capital at a difficult time for large buyout companies.
KKR also plans to raise $20 billion for its latest flagship private equity fund in North America, Reuters reported in June.
Some investors, or limited partners, have been reluctant to make new commitments to private equity firms, which have struggled to return capital as persistently high interest rates make it difficult to sell companies to other buyout companies or refinancing companies.
“We’re in a really tough fundraising environment, but we exceeded our target and could have raised much more capital than the cap,” Pete Stavros, KKR’s global co-head of private equity, said in an interview. “It’s a real validation that we’re unique.”
However, private equity-backed deal volumes are expected to rise in the near term, after the Federal Reserve cut interest rates on borrowing in the US last week.
Global private equity-backed buyout volumes have risen 41% to $517.2 billion so far this year, according to LSEG data, as an improving financing environment has spurred increased acquisition activity.
Launched in 2022 and part of KKR’s Americas private equity platform, Ascendant is the first dedicated fund to exclusively target deals for middle-market companies across industries including consumer, financial services, healthcare, industrials, media and software.
The new fund, which was oversubscribed at the time of closing, has received backing from a range of investors including public pension funds, family offices and insurance companies. Ascendant has so far closed six deals for companies including software supplier Alchemer, dental care chain 123Dentist and firefighting equipment supplier Marmic Fire & Safety.
The latest move by KKR, which has traditionally focused on larger acquisitions, comes as private equity firms increasingly look to tap new opportunities as the volume of larger leveraged buyouts slows.
KKR has also pledged to offer shares to ordinary employees at all of its North American portfolio companies from the new fund, an incentive the corporate world has traditionally reserved for top executives.
This employee ownership program was launched on a large scale in 2011 by Stavros at the company’s industrial investments, and has since expanded across North America and globally. KKR said more than 50 of its portfolio companies have granted billions of dollars in stock to more than 110,000 employees to date.
KKR said the program has led to increased revenue, improved productivity and lower turnover at its portfolio companies. Henry Kravis, KKR’s co-founder and co-CEO, told the firm’s investors in April that the employee ownership program had led to about $175,000 in additional income per employee at CHI, an overhead garage door company that KKR previously owned.