Jerome Kohlberg Jr. (July 10, 1925 – July 30, 2015) was an American businessman and investor. He was an early pioneer in the
private equity
In the field of finance, the term private equity (PE) refers to investment funds, usually limited partnerships (LP), which buy and restructure financially weak companies that produce goods and provide services. A private-equity fund is both a typ ...
and
leveraged buyout
A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of borrowed money ( leverage) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loa ...
industries founding
private equity firm
A private equity firm is an investment management company that provides financial backing and makes investments in the private equity of startup or operating companies through a variety of loosely affiliated investment strategies including le ...
Kohlberg Kravis Roberts & Co. and later
Kohlberg & Company.
Early life and education
Kohlberg was raised in a
Jewish family
Jews ( he, יְהוּדִים, , ) or Jewish people are an ethnoreligious group and nation originating from the Israelites Israelite origins and kingdom: "The first act in the long drama of Jewish history is the age of the Israelites""The ...
graduating from
New Rochelle High School
New Rochelle High School (NRHS) is a public high school in New Rochelle, New York. It is part of the City School District of New Rochelle and is the city's sole public high school.
Its student body represents 60 countries from around the world. I ...
in
New Rochelle, New York
New Rochelle (; older french: La Nouvelle-Rochelle) is a city in Westchester County, New York, United States, in the southeastern portion of the state. In 2020, the city had a population of 79,726, making it the seventh-largest in the state of ...
. Kohlberg served in the
United States Navy
The United States Navy (USN) is the maritime service branch of the United States Armed Forces and one of the eight uniformed services of the United States. It is the largest and most powerful navy in the world, with the estimated tonnage ...
during
World War II
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the World War II by country, vast majority of the world's countries—including all of the great power ...
and went on to college and graduate school on the
GI Bill
The Servicemen's Readjustment Act of 1944, commonly known as the G.I. Bill, 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, bu ...
. He earned an undergraduate degree from
Swarthmore College
Swarthmore College ( , ) is a private liberal arts college in Swarthmore, Pennsylvania. Founded in 1864, with its first classes held in 1869, Swarthmore is one of the earliest coeducational colleges in the United States. It was established as ...
. He later received an MBA from
Harvard Business School
Harvard Business School (HBS) is the graduate business school of Harvard University, a private research university in Boston, Massachusetts. It is consistently ranked among the top business schools in the world and offers a large full-time MBA ...
and an LLB from
Columbia Law School
Columbia Law School (Columbia Law or CLS) is the law school of Columbia University, a private Ivy League university in New York City. Columbia Law is widely regarded as one of the most prestigious law schools in the world and has always ranked ...
. 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 a New York-based global investment bank, securities trading and brokerage firm that failed in 2008 as part of the global financial crisis and recession, and was subsequently sold to JPMorgan Chase. The c ...
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
leveraged buyout
A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of borrowed money ( leverage) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loa ...
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 bonds.
By 1976 tensions had built up between
Bear Stearns
The Bear Stearns Companies, Inc. was a New York-based global investment bank, securities trading and brokerage firm that failed in 2008 as part of the global financial crisis and recession, and was subsequently sold to JPMorgan Chase. The c ...
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 investment company that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate, credit, and, through its stra ...
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 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 and
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) 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 listed on a stock exchange, in contrast to ...
. 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 equit ...
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.
See also
*
List of billionaires
''The World's Billionaires'' is an annual ranking by documented net worth of the wealthiest billionaires in the world, compiled and published in March annually by the American business magazine ''Forbes''. The list was first published in March ...
*
History of private equity and venture capital
The history of private equity and venture capital and the development of these asset classes has occurred through a series of boom-and-bust cycles since the middle of the 20th century. Within the broader private equity industry, two distinct ...
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
Jewish American philanthropists
Kohlberg Kravis Roberts
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