KKR & Co. (KKR:US), the private-equity firm run by Henry Kravis and George Roberts, named former Morgan Stanley Chief Executive Officer John Mack as a senior adviser.
He will join executives including former Caterpillar Inc. CEO James Owens and Bertelsmann AG’s former co-chairman, Richard Sarnoff, who advise the firm on investments, New York-based KKR said in a statement today.
“He will help make us smarter investors and strengthen our firm,” Kravis said in the statement.
Leveraged buyout firms such as KKR are adding to their financial-services teams as they seek to purchase businesses from banks that are under pressure by regulators and markets to sell assets in the wake of the financial crisis.
“The volatile economic environment has created a demand for both capital and operational expertise,” said Mack, 67, whose reputation for swift cost-cutting earned him the nickname “Mack the Knife.”
He stepped down as chairman of Morgan Stanley (MS:US) at the end of last year, two years after leaving the CEO role he held at the Wall Street bank from 2005 to 2010. Mack boosted businesses including trading, private equity and mortgages, a strategy that backfired when the bank posted its first quarterly loss in 2007 on the eve of the financial crisis.
Morgan Stanley sold stakes (MS:US) to China Investment Corp. and Japanese bank Mitsubishi UFJ Financial Group to raise capital and converted to a bank in 2008, when the shares (MS:US) tumbled 70 percent. New York-based Morgan Stanley also took $107 billion of Federal Reserve emergency loans, more than any other firm, during the crisis.
“He destroyed the value of my shares, lost market share, panicked and wound up a winner,” Chuck Ronson, a trader at New York-based Profectus Investments, said of Mack in an e-mail.
KKR said last month it has amassed $6 billion for its next buyout fund focused on North America. The company is targeting $10 billion for the fund.
Buyout firms such as KKR typically use loans secured by the targets they acquire to finance more than half of the purchase price and cash from their own funds for the rest. They try to improve performance at the companies they acquire or expand them before selling them within about five years.
Mack said in 2009 that he reached out to regulators after turning down the chance to finance a leveraged buyout deal during the credit boom.
“I missed a piece of business,” Mack said he told the regulators then. “I can live with that, but as soon as I hung up the phone someone else put up 10 times leverage. We cannot control ourselves. You have to step in and control the Street.”
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