(Bloomberg) -- At the start of the pandemic, KKR & Co. decided to go on a massive spree that allowed the buyout behemoth to double its European private equity business in recent years. Now it’s looking to do it again.
The unit’s assets under management have doubled in the last five years and are now over $37 billion, according to Mattia Caprioli, who co-heads KKR’s business across Europe, the Middle East and Africa. The company is hoping an active pipeline of deals will help it pull off the same level of growth in the coming years.
“I think we can double it again,” Caprioli, who was an early employee at KKR Europe, said in an interview from the International Private Equity Market event in Paris this week alongside his co-head Tara Davies. “I know the tone is ‘Let’s look to 2025 as activity has not really picked up, IPO markets are still relatively shut globally.’ But in reality we have been much more active this year.”
KKR completed its first European investment almost 30 years ago and raised its first dedicated fund for the continent in 1999. It’s raised a total of six vehicles focused on the region, including an $8 billion fund it closed last year.
The executives’ bullishness is the latest sign that the private equity industry is determined to make a comeback after struggling with company exits due to differing price expectations of buyers and sellers. The reluctance to sell led to tensions between PE funds and their investors — known as limited partners — with the latter asking them to return more cash.
The fact that many PE funds weren’t able to return hoards of cash to their investors created a vicious cycle for the industry. It meant many limited partners had to stop allocating money to alternative asset managers, leaving buyout funds unable to raise fresh money for deals.
Many funds are now focused on improving a metric known as distributed to paid-in capital — the ratio of cash generated to what’s invested. That means fewer competitors are looking to deploy the industry’s vast trove of dry powder and has allowed KKR to swoop in and win a number of deals, Davies said.
“We have seen attractive opportunities over the last couple of years that would have been heavily bid had it not been for the market conditions,” she said.
KKR has been also focusing on expanding its investments in infrastructure, said Davies, who also co-heads the company’s investments in that area across Europe. That sector has been especially active as governments around the world have loaded up on debt since the great financial crisis, paving the way for buyout funds to take a more active role in the development of bridges, roads, data centers and telecommunications.
For instance, KKR in November agreed to buy Telecom Italia’s landline network — the company’s most valuable asset — in a move aimed at slashing the phone carrier’s liabilities. The €22 billion ($24.4 billion) sale, which regulators approved in May, was the first of its kind for European phone carriers.
And KKR in March said it would acquire renewable-energy producer Encavis AG in a deal that values the German company at about €2.8 billion.
“The nice thing about infrastructure is whether governments are sitting right or left actually infrastructure tends to be politically neutral because it creates jobs and GDP,” Davies said.
(Updates with additional information on deals in penultimate paragraph.)
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