BY Richard Summerfield
Private equity (PE) powerhouse KKR and Co has announced the final close of KKR Ascendant Fund SCSP, a $4.6bn fund dedicated to investing in middle market businesses in North America.
The fund, which was launched in 2022, is the first KKR vehicle solely focused on opportunities in the middle market and will target established companies with strong growth potential across seven industry verticals: consumer, financial services, healthcare, industrials, media, software and tech-enabled services.
“We are very proud of the strong response we have received from our fundraising efforts and believe that Ascendant is well-positioned to address the robust and attractive opportunities in the North American middle market,” said Pete Stavros and Nate Taylor, co-heads of KKR Global Private Equity. “We have long invested in this space in our Americas Private Equity funds and have found that we can harness KKR’s unique resources and expertise in value creation to deliver highly differentiated business outcomes. We wanted to launch a fund dedicated to this segment so that our investors could directly participate in the compelling outcomes we believe we can continue to deliver in the middle market.”
“Broad-based employee ownership and engagement programs are a key part of how KKR creates and maintains value across our portfolio companies,” said Nancy Ford and Brandon Brahm, co-heads of KKR’s Ascendant strategy. “Having seen the great success of these programs in other areas of KKR’s portfolio, we are thrilled that Ascendant will build on that strong foundation. These programs, which provide both equity ownership to employees and a strategy to enhance employee engagement, are implemented with the goal of creating aligned interests and enabling all employees to participate in the investment outcomes their work creates.”
The Ascendant fund, which was oversubscribed at the time of its closing, received backing from a range of investors, including public pensions, family offices and insurance companies. To date, the fund has struck six deals for companies including software provider Alchemer, dental care chain 123Dentist, and fire equipment provider Marmic Fire & Safety.
In a break from PE tradition, KKR has pledged to offer equity to employees of all its North America portfolio companies from the new fund. Typically, such an offer is usually reserved only for senior executives. However, over the last decade, emboldened by the firm’s investments in the industrial sector which began using the model, KKR has since expanded the employee ownership programme to more than 50 of its portfolio companies, awarding billions of dollars of equity to more than 110,000 employees. The firm believes it leads to higher revenue, improved productivity and lower turnover within its portfolio companies.
KKR, which had $601bn in assets under management (AUM) as of the end of June, has been attempting to raise capital at a difficult time for fundraising for large buyout firms. Limited partners have been unenthusiastic about making new commitments. PE firms have struggled to return capital amid persistently high interest rates, which have made selling companies to other buyout firms or refinancing companies challenging. However, after the Federal Reserve recently cut US borrowing rates, there is an expectation that PE-backed deal volume will begin to climb again.
News: KKR raises $4.6 billion for debut North America mid-market deals fund