King of Leveraged Buyouts

Most business owners struggle with financial freedom.

Why?

They treat the company like a personal identity project instead of an asset with a price, a plan, and an exit.

They make it too heroic.

They believe freedom comes from building everything from scratch, alone. And through sheer will.

It makes you wonder why they fail to allow structure and incentives to do the heavy lifting.

They use bootstrapping-as-a-religion.

That is, they avoid leverage.

They refuse to “buy” cash-flow.

Does debt feel to them like a moral failure rather than a tool with rules?

They celebrate the purchase instead of the exit.

They underinvest in the unglamorous parts: team, culture, and operational craft.

Those are the parts that actually make value real.

Not Henry Kravis.

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Henry Roberts Kravis was born in 1944 in Tulsa, Oklahoma, into an oil‑business family. He earned a B.A. in economics from Claremont McKenna College and an MBA from Columbia Business School. This was before beginning his Wall Street career.

Henry Kravis is co-founder of the private equity firm Kohlberg Kravis Roberts (KKR). He serves as Co‑Executive Chairman. Kravis co‑founded KKR in 1976. It was after working in corporate finance at Bear Stearns. There, he worked with his cousin George Roberts and Jerome Kohlberg. That’s when Kravis helped pioneer the leveraged buyout (LBO) model.

LBO is an acquisition, usually by a private equity firm. The buyer uses debt and a relatively small amount of equity. They secure the debt by the target company’s own assets. Which is repaid from the company’s future cash flows.

Suppose you buy a company for 100, financed with 70 of debt and 30 of equity. Five years later, you sell the company for 150. You paid down the debt to 40. Equity value at exit is 110 (150 minus 40). So the original 30 of equity has more than tripled. That produced a high annualized return because leverage magnified the gain.

KKR under Kravis’ leadership became one of the most influential private equity firms. KKR completed more than a hundred large acquisitions across sectors. Such as consumer products, energy, and retail.

Henry Kravis led the 1988 leveraged buyout of RJR Nabisco, then the largest buyout in history. It was later chronicled in the book and film Barbarians at the Gate. Over the years, KKR deals associated with Kravis have involved several companies. Such as Safeway, Beatrice, Borden, Duracell, and TXU (Energy Future Holdings).

Kravis helped build KKR around three disciplines:

paying attention to price, capital structure, and operational improvement.

Who does this “acquire + improve + exit” approach work best for?

People who want freedom without needing to be the genius-inventor. And yes, you can stop chasing validation and start designing wealth like an engineer.

Kravis is a multibillionaire; recent estimates place his net worth at over $10 billion. 

I like you,

– Sean Allen Fenn

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