Jerome Kohlberg Jr. (July 10, 1925 – July 30, 2015) was an American businessman and investor. He was an early pioneer in the

private equity Private equity (PE) is stock in a private company that does not offer stock to the general public; instead it is offered to specialized investment funds and limited partnerships that take an active role in the management and structuring of the co ...

and

leveraged buyout A leveraged buyout (LBO) is the acquisition of a company using a significant proportion of borrowed money (Leverage (finance), leverage) to fund the acquisition with the remainder of the purchase price funded with private equity. The assets of t ...

industries founding

private equity firm A private equity firm or private equity company (often described as a financial sponsor) is an investment management company that provides financial backing and makes investments in the private equity of a Startup company, startup or of an existin ...

Kohlberg Kravis Roberts & Co. and later Kohlberg & Company.

Early life and education

Kohlberg was raised in a Jewish family graduating from New Rochelle High School in

New Rochelle, New York New Rochelle ( ; in ) is a Political subdivisions of New York State#City, city in Westchester County, New York, Westchester County, New York (state), New York, United States. It is a suburb of New York City, located approximately from Midtow ...

. Kohlberg served in the

United States Navy The United States Navy (USN) is the naval warfare, maritime military branch, service branch of the United States Department of Defense. It is the world's most powerful navy with the largest Displacement (ship), displacement, at 4.5 millio ...

during

World War II World War II or the Second World War (1 September 1939 – 2 September 1945) was a World war, global conflict between two coalitions: the Allies of World War II, Allies and the Axis powers. World War II by country, Nearly all of the wo ...

and went on to college and graduate school on the

GI Bill The G.I. Bill, formally the Servicemen's Readjustment Act of 1944, was a law that provided a range of benefits for some of the returning World War II veterans (commonly referred to as G.I.s). The original G.I. Bill expired in 1956, but the te ...

. He earned an undergraduate degree from

Swarthmore College Swarthmore College ( , ) is a Private college, private Liberal arts colleges in the United States, liberal arts college in Swarthmore, Pennsylvania, United States. Founded in 1864, with its first classes held in 1869, Swarthmore is one of the e ...

. He later received an MBA from

Harvard Business School Harvard Business School (HBS) is the graduate school, graduate business school of Harvard University, a Private university, private Ivy League research university. Located in Allston, Massachusetts, HBS owns Harvard Business Publishing, which p ...

and an LLB from

Columbia Law School Columbia Law School (CLS) is the Law school in the United States, law school of Columbia University, a Private university, private Ivy League university in New York City. The school was founded in 1858 as the Columbia College Law School. The un ...

. In 1986, he founded the Philip Evans Scholarship Foundation at Swarthmore.

Career

Kohlberg Kravis Roberts & Co.

Kohlberg joined

Bear Stearns The Bear Stearns Companies, Inc. was an American investment bank, securities trading, and brokerage firm that failed in 2008 during the 2008 financial crisis and the Great Recession. After its closure it was subsequently sold to JPMorgan Chas ...

in 1955 where he would go on to manage the corporate finance department. Working for Bear Stearns in the late 1960s and early 1970s, Kohlberg, alongside Bear Stearns executives began advising a series of what they described as "bootstrap" investments. Their acquisition of Orkin Exterminating Company in 1964 is considered to have been among the first significant

transactions. In the following years the three Bear Stearns bankers would complete a series of buyouts including Stern Metals (1965), Incom (a division of Rockwood International, 1971), Cobblers Industries (1971), and Boren Clay (1973) as well as Thompson Wire, Eagle Motors and Barrows through their investment in Stern Metals. Although they had a number of highly successful investments, the $27 million investment in Cobblers ended in bankruptcy. Kravis and his associates created a series of limited partnerships to acquire these various corporations, ones they judged were performing well below their sales and profit potential or where there were untapped financial assets that could be monetized. In most cases, Kohlberg Kravis Roberts & Co put up ten percent of the acquisition price from its own funds and borrowed the rest from investors by issuing

high-yield bond In finance, a high-yield bond (non-investment-grade bond, speculative-grade bond, or junk bond) is a bond that is rated below investment grade by credit rating agencies. These bonds have a higher risk of default or other adverse credit even ...

s. By 1976 tensions had built up between

and the trio of Kohlberg, Kravis and Roberts leading to their departure and the formation of

Kohlberg Kravis Roberts KKR & Co. Inc., also known as Kohlberg Kravis Roberts & Co., is an American global private-equity and investment company. , the firm had completed private-equity investments in portfolio companies with approximately $710 billion of total ...

in that year. Most notably, Bear Stearns executive Cy Lewis had rejected repeated proposals to form a dedicated investment fund within Bear Stearns and Lewis took exception to the amount of time spent on outside activities. Early investors in KKR included the Hillman Family Group of

Henry Hillman Henry Lea Hillman (December 25, 1918 – April 14, 2017) was an American billionaire businessman, investor, civic leader, and philanthropist. He was chairman of The Hillman Company, a family office and investment company headquartered in ...

and the Hillman Company. By 1978, with the revision of the ERISA regulations, the nascent KKR was successful in raising its first institutional fund with approximately $30 million of investor commitments.

Kohlberg & Company

In 1987 Kohlberg resigned from KKR over differences in strategy and

Henry Kravis Henry Roberts Kravis (born January 6, 1944) is an American businessman, investor, and philanthropist.George Roberts assumed full leadership of the firm. Kohlberg did not favor the large buyouts (which would likely have included the 1989 takeover of

RJR Nabisco R. J. Reynolds Nabisco, Inc., doing business as RJR Nabisco, was an American conglomerate, selling tobacco and food products, headquartered in the Calyon Building in Midtown Manhattan, New York City. R. J. Reynolds Nabisco stopped ...

) or

hostile takeovers In business, a takeover is the purchase of one company (the ''target'') by another (the ''acquirer'' or ''bidder''). In the UK, the term refers to the acquisition of a public company whose shares are publicly listed, in contrast to the acquisi ...

. Instead, Kohlberg chose to return to his roots, acquiring smaller, middle-market companies and, in 1987, founded a new private equity firm Kohlberg & Company. As of the end of 2007 Kohlberg & Company had raised six

private equity fund A private equity fund (abbreviated as PE fund) is a collective investment scheme used for making investments in various equity (and to a lesser extent debt) securities according to one of the investment strategies associated with private equity. ...

s since its inception, with approximately $3.7 billion of investor commitments. Additionally, Kohlberg also operated a series of debt investment funds under the banner of Katonah Debt Advisors, as well as a publicly traded investment vehicle Kohlberg Capital (NASDAQ:KCAP). Kohlberg retired from Kohlberg & Company in 1994. Kohlberg died of cancer on July 30, 2015, on Martha’s Vineyard in Massachusetts, twenty days after his 90th birthday.

Philanthropy

Kohlberg participated in philanthropy through the Kohlberg Foundation.

References

External links

Kohlberg FoundationForbes.com: Forbes World's Richest People
(2004)

{{DEFAULTSORT:Kohlberg, Jerome Jr. 1925 births 2015 deaths 20th-century American businesspeople 21st-century American businesspeople American billionaires American chairpersons of corporations American chief executives of financial services companies American financial company founders American financiers American investors American money managers Bear Stearns people Businesspeople from New Rochelle, New York Columbia Law School alumni Harvard Business School alumni Kohlberg Kravis Roberts people Philanthropists from New York (state) Private equity and venture capital investors Swarthmore College alumni 20th-century American philanthropists United States Navy personnel of World War II Deaths from cancer in Massachusetts 21st-century American Jews New Rochelle High School alumni