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KKR passes target for its first mid-market fund launched

in 2022

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The Ascendant Fund has struck six deals so far

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Employees at portfolio companies from fund to receive

equity

By Echo Wang

NEW YORK, Sept 23 (Reuters) - KKR & Co ( KKR ) has

raised $4.6 billion for its debut fund focused on mid-sized

deals in North America despite a difficult fundraising

environment as high interest rates dampened investors' appetite

for debt-driven buyouts, the U.S. private equity firm told

Reuters on Monday.

New York-based KKR, which had $601 billion in assets under

management as of the end of June, has been attempting to raise

capital at a difficult time for fundraising for large buyout

firms.

KKR is also planning to raise $20 billion for its latest

flagship North America private equity fund, 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

have made selling companies to other buyout firms or refinancing

companies challenging.

"We are in the context of a really difficult fundraising

environment, but we blew past our target, and we could have

raised a lot more capital than the hard cap. It's a real

validation that we are differentiated," Pete Stavros, KKR's

global co-head of private equity, said in an interview.

Private equity-backed deal volumes, however, are expected to

bounce back in the near term, after the Federal Reserve cut U.S.

borrowing rates last week.

Global private equity-backed buyout volumes have jumped 41%

to $517.2 billion so far this year, according to LSEG data, as

an improved financing environment has spurred increased buyout

activity.

The Ascendant Fund, which was launched in 2022 and is part

of KKR's Americas private equity platform, is its first

dedicated fund exclusively targeting 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 its

closing, received backing from a range of investors, including

public pensions, family offices, and insurance companies. The

Ascendant Fund has so far struck six deals for companies

including software provider Alchemer, dental care chain

123Dentist, and fire equipment provider Marmic Fire & Safety.

The latest move from KKR, which has traditionally focused on

larger buyouts, comes as private equity firms are increasingly

looking to tap new opportunities due to a slowdown in larger

leveraged buyout volumes.

KKR has also committed to offering equity to rank-and-file

employees of all its North America portfolio companies from the

new fund. This is an incentive the corporate world traditionally

reserves only for senior executives.

This broad-based employee ownership program was started in

2011 by Stavros in the firm's investments in the industrial

sector, and was then expanded in North America and globally. KKR

said over 50 of its portfolio companies have, so far, awarded

billions of dollars of equity to more than 110,000 employees.

KKR has said the program has led to higher revenue, improved

productivity and lower turnover at its portfolio companies. KKR

co-founder and co-executive chair Henry Kravis told the firm's

investors in April that the employee ownership program resulted

in about $175,000 of additional income per employee at CHI, an

overhead garage door business that KKR previously owned.