How KKR Creates Value Through Technology
Tech is being used by the private equity giant to reduce risk and increase investments’ value
For private equity funds, technological improvement is a key tool for portfolio company value creation.
KKR executes that strategy through its partnership with KKR Capstone, a standalone firm (it licenses the KKR name) that specializes in operational improvement. Two members of the Capstone team—managing partner Derick Prelle and director Usman Rabbani—share some lessons learned as it helps KKR leverage tech across its portfolio.
Build an internal network
KKR’s portfolio companies, in total, have more than 300 senior IT executives globally who direct roughly $5B of hardware, software, and services spending per year. Prelle says KKR systematically invests time and effort to build and maintain “trust-based relationships and dialogue” with these executives. The relationships afford the firm an opportunity to do “rapid diligence” when a need arises, he explains, be it researching a major digital initiative, hiring a new CIO, or negotiating a new outsourcing contract. They also come handy when KKR is evaluating a new investment into technology space and is looking for something like customer diligence.
Develop preferred partnerships
Over time, KKR has developed alliances with technology providers in various areas, including application development and cyberthreat assessment. The company is also increasingly investing in preferred partnerships in IT, telecom, software, hardware, and services for portfolio companies.
“The benefits of [such partnership] include getting the ‘A team’ from a technology provider, regardless of whether it is a large or small company [or] account, and both parties are being able to escalate quickly and amicably using the KKR relationship to resolve operational issues,” says Rabbani.
Share best practices
Every two years, KKR holds a technology summit featuring keynote sessions by senior executives and Silicon Valley thought leaders, along with interactive breakout sessions that are anchored by common areas of interest, such as cybersecurity, talent, and analytics. These also feature TechCrunch-style, rapid-fire presentations from various companies.
In the alternate year, the firm holds smaller focused events zeroing in on a specific industry and functional areas, including an Innovation Summit, a Risk Summit and other sessions focused on chief human resources officers and CFOs.
Select the best
Internally, KKR Capstone operating executives vet partners, vendors, and suppliers to ensure they are best in class, says Prelle. The potential partners are evaluated based on the ability to deliver superior subject matter expertise, a track record of driving value in companies, and fair compensation rates.
KKR Capstone works with the PE giant, using tech to de-risk and increase the value of an investment.