Ken Mehlman sat down with Cristina Alesci for Super Return TV in Boston to discuss different aspects of private equity, operational expertise, and General David Petraeus joining KKR.
Cristina Alesci: Let’s start on what you just spoke about on the panel, and this idea that private equity firms are using more and more operational expertise to generate returns and improve businesses. We’ve heard that a lot from other firms as well, what makes KKR different?
Ken Mehlman: Well I think that one of differences we bring to the table is we have 60 in our firm who are operational experts. One gentlemen is an expert at Lean Six Sigma, someone else is an expert in purchasing…and these 60 people go into the company, typically for an 18-24 month period, and focus with that company on the specific area we think that that company can be operationally enhanced…So when we’re looking at a company, we sit down with our investment committee. We say, “What’s our thesis? What do we do to make this company better?” A huge part of that in many cases is, we operated better, we operated in a more affective way, and operated to grow.
Cristina Alesci: Why the focus on operations – why does it seem to be the hot topic?
Ken Mehlman: The private equity industry is first and foremost about solving problems for companies and how we can make them better. Operational focus takes this alignment to the next level.
Cristina Alesci: KKR just announced that it is going to start a formal relationship with General Petraeus.
Ken Mehlman: General Petraeus will lead an effort called the KKR Global Institute, and what that effort will do is build on the work that my colleague Henry McVey and I have tried to do over the last 5 years. Which is to help us understand macroeconomic, geopolitical, governance, environmental, regulatory, external factors that in today’s world are really important to the success of an investment or the failure of an investment, and are really important to helping our companies do even better and be better citizens.