Editor's letter

Visit an online news archive. Throw the names “Kravis” and “Roberts” into the search engine. Then go back to the mid-1980s.

What you'll find, in case you'd forgotten – or, like me, are too young to remember: Kohlberg Kravis Roberts & Co ruled the roost well before the notorious takeover of RJR Nabisco, and the cult of personality surrounding the press-avoiding Henry Kravis had already begun.

Half way through the decade, the firm had changed the face of M&A on Wall Street. Kravis himself was fabulously wealthy, a high-profile member of New York society and a patron of the arts. When RJR CEO Ross Johnson made his clumsy move to buy the tobacco giant in 1989, there was widespread expectation that Kravis wouldn't leave the largest buyout in history to someone else. And the man then typically referred to as the “king of LBOs” duly stepped up to the challenge.

Kravis won the battle, but the years that followed weren't happy. For a period, the KKR moniker, rightly or wrongly, became synonymous with hubris, and the firm's investment performance sagged for much of the 1990s compared to its 1980s fortunes. A 1997 bet on cinemas produced a $500 million total write-off – a low point in KKR's history.

Lesser men (or those who choose golf over work) might have thrown in the towel, and the firm could have easily faded from view. What happened next is testimony to exceptional drive and determination. Messrs. Kravis and Roberts took a long, hard look at each other and decided to change their ways of doing business. Since then the firm has regained much momentum. In a profile published in March 2006, The Economist described KKR's remake as “a triumph”.

Since RJR, private equity as an asset class has changed beyond recognition. One of the few constants is the dominance and leadership of KKR – now reinvigorated, global in reach, and with deeper pockets than ever.

We often cover KKR as it expands around the world. But given the central role it has played in the development of the industry, we thought it the right time to examine more closely how the firm is relevant today. The cover story of this issue, beginning on p. 41 is the story of the firm's reinvention. And with Henry R. Kravis and George R. Roberts showing no signs of fatigue, despite being well into their 60s, the final chapter of the story has yet to be written.

Enjoy the issue,

Philip Borel

Managing Editor