By Matthew Spieler
Hicksville, N.Y.—After nearly a month of speculation among the world’s financial community, buyout firm Kohlberg Kravis Roberts & Co. (KKR) has entered into a definitive partnership agreement with the Deconinck family. This deal gives KKR a 50% stake in SIF (Societe d’Investissement Familiale), which controls the majority of Tarkett S.A. Based in Nanterre, France, Tarkett S.A. is the parent company of the flooring manufacturer’s worldwide operations.
At the same time, SIF is to acquire most of the Tarkett shares it does not already own from financial investors.
What this all means is the strategic partnership will give KKR half ownership of Tarkett.
Zoe Watt, a spokesperson for KKR, told FCNews, the company was attracted to Tarkett because it sees “a great future and potential.” While the company is always searching different sectors for investment, she said it is already experienced in the building industry so officials are confident the firm cannot only support but help Tarkett reach new heights.
According to a release from KKR, the long-term objective of this partnership is “to support Tarkett’s management in the company’s global development through organic growth and selected acquisitions, as well as in the continuation of the company’s long-standing innovation policy.”
While much of the “organic” growth opportunity is projected for Eastern Europe and Asia, the company does expect “bolt-on” opportunities elsewhere.
Jacques Garaïalde, KKR’s managing director, called Tarkett “a global leader in its core markets with attractive development opportunities. We intend to provide our support and expertise to the company’s management and help it implement its long-term strategic initiatives.”
Didier Deconinck, chairman of Tarkett’s supervisory board, added, “Our alliance with KKR marks the beginning of a new era. It will enable the minority shareholders who have supported us for a number of years to exit on good terms, and it will provide our company with a new and sustainable basis to respond to the challenges and opportunities it will have to face in a rapidly changing world.”
At press time, KKR was not disclosing any specific plans it may have with Tarkett’s North American operations.
Based on KKR’s 30-year history, any changes it does implement, will be for the better. Since its founding in 1976, the company, which has offices in New York, California, London, Paris, Hong Kong and Tokyo, has become one of the world’s largest and most successful private equity firms, including some of the most complex buyout transactions in history, such as RJR Nabisco at $31.4 billion.
It already owns the distinction of having the largest leveraged buyouts in six countries—France, the Netherlands, Singapore, Denmark, Australia and India—as well as three of the largest Canadian buyouts. KKR also has the first billion-dollar buyout transaction and the first buyout of a public company by tender offer.
In fact, over 140 transactions have been completed, valued at approximately $215 billion. As of June 30, these deals have created $68 billion of value on $26 billion of invested capital, a multiple of 2.6 times.
One of the main reasons the company cites for its successful track record is its “deep industry expertise that enables the firm to identify attractive acquisitions and to increase their value though operational improvements.”
With investment professionals organized into nine primary industry groups, KKR’s investment team sources acquisitions and works with senior managers of its portfolio companies to design ways of growing and improving their business, determine the optimal capital structure to support a company’s strategy, provide access to global resources that strengthen operational execution, and realize value for investors when exiting a company.
That last part is important, but should not be worrisome as KKR’s strategy is generally long-term. The firm’s investment professionals work closely with management to develop operating budgets that support research and development, capital spending, and acquisitions. “We want the managers of our portfolio companies to own the results of their decisions,” the company states on its Web site.
“We are patient investors,” the company noted. “We do not focus on quarter-to-quarter results. We focus on building businesses over the long term. Typically KKR holds investments for several years, and in some cases we have held them for more than a decade.”
When it does decide to spin off a company “we exit our investments through IPOs, secondary offerings and to strategic buyers, and profits are distributed to our investors, including corporate and public pensions, financial institutions, insurance companies and university endowments.”
The point KKR management makes is it partners with companies that have a bright future but need some help achieving their full potential. Through KKR’s support, a company is allowed to grow and prosper. When it reaches a stage it can operate in that manner successfully by itself, the investment firm lets it go.