A cofounder of Kohlberg Kravis Roberts & Co. (KKR) in 1976, Henry Kravis helped to devise the leveraged buyout, or LBO. The strategy enabled KKR to enter partnerships with companies by working with management to acquire blocks of stock through the assumption of debt. Like homeowners with a mortgage, companies could glean tax advantages from gradually repaying what they owed. Ideally, companies carrying debt and partly owned by management must operate responsibly. Though not free of controversy—Michael Milken and Ivan Boesky of Drexel Burnham Lambert helped raise capital for KKR in the mid-1980s—KKR has thrived. As a pioneer of the LBO, KKR has created large holdings for itself, which include RJR Nabisco-acquired for more than $25 billion, in the largest LBO ever executed-and has produced fortunes for its partners.
