KKR Europe chief Johannes Huth has readily available completely made-up statistics to ward off those who contend that PE firms are just "financial engineers."
From Deal Journal:
At a panel discussion in Frankfurt today, Huth said the private-equity firm earns most of its money — 60% of it actually — from improving the operations of companies it buys. According to Huth, 25% to 30% of the gains in its portfolio come from reducing debt at those companies. (The remainder comes from “multiple expansion,” or a broad increase in market values.)
The fact that a PE firm doesn’t earn anything by merely “improving” company operations, and that an operational improvement would in many cases lead to steady debt pay down (yet a separate category) and a multiple expansion on some sort of liquidity event, means that statistics like this are pretty much made up, because they can be defined any way the PE firm wants.
Since when is KKR so whiney anyway? From bad-ass barbarism to bitchiness is a long PR tumble. KKR should go back to raiding, looting, pillaging (I mean “operational improvement”), without remorse. There's no law against financial engineering - the whining is all bruised ego at this point, or at least people trying to cling to low taxes on carry. You're not saving the (cheerleader or the) world Kravis, or most business for that matter, get over it and be content with your billions, consistent returns, and impending golden shower of an IPO.
Financial Engineering at KKR? Never [Deal Journal]