It is not even noon on Monday and Johannes Huth’s head is full of multimillion-pound deals. A private equity heavyweight in Europe, the head for the region at KKR, the US buyout giant, has his pulse on some of the largest transactions around. Monday is the busiest day for the keen cyclist and skier because he sits on all the main investment committees that look at the pipeline of opportunities in Europe.
These days there is a bucketful of them and cheap debt is giving dealmakers a further boost. “Financing is at an all-time high,” the 57-year-old says from his office in a discreet building close to London’s private members’ club district in Pall Mall.
“That could drive more deals.” He may not be as well known as Steve Schwarzman at Blackstone or Guy Hands at Terra Firma but he has been the driving force in building KKR’s empire in Europe for nearly two decades.
There are no signs he is slowing down. Instead, the private equity group is set to get a new stamp of approval from investors as it looks to raise its latest European fund of €5bn next year.
Mr Huth will be the executive behind the fundraising effort, and if past experience is any guide, the new KKR fund is likely to be oversubscribed, not least because of the enduring popularity of such large buyout vehicles. But things have not always been discussed in the billions in his career spanning three decades.
Back in 1993, he was behind Investcorp’s purchase of Thorn Lighting. The £165m transaction was considered huge at the time, and included £100m of debt. The debt deal was considered so big that, at the time, all four large clearing banks had to underwrite it, as no single entity wanted to take on all the risk.
After stints at Investcorp, the buyout firm, and Salomon Brothers, the investment bank, Mr Huth’s career took off as head of European operations for KKR in 1999. When he joined, the company had 30 people globally and $21bn under management. The New York-based asset manager now employs more than 1,100 professionals and has $153bn in assets under management.
“It’s been quite a journey,” says the German citizen with an almost indistinguishable smile, softly spoken, yet firm. And it seems the ride is about to get even more exciting. Many in the industry, KKR included, have experienced record demand from investors to participate in private equity funds in a low interest-rate environment. This has helped fuel a frenetic M&A market marked by a number of deals at historic high valuations.
Since the financial crisis, the group has refocused on smaller deals, away from mammoth transactions such as the £12bn acquisition of Boots, the UK high street chain and drug wholesaler, one of KKR’s most successful deals.
The group also partakes in large leveraged buyouts. KKR is currently bidding for the spread business of Unilever, the consumer goods group, which has been valued at $7bn, and Akzo Nobel’s speciality chemical unit, which could fetch up to €9bn, according to people familiar with the deal. Both auctions are set to accelerate in the coming weeks, people familiar with the process have said. KKR declined to comment.
“Right now, because prices are very high in the industry, there is significant volume on the market,” Mr Huth explains.
KKR’s pedigree in the sector has helped open doors for Mr Huth, industry observers say. Founded in 1976 by Henry Kravis, George Roberts and Jerome Kohlberg, the firm came to notoriety after the $25bn takeover of RJR Nabisco in the late 1980s.
The deal earned them a chunky section in the history of the industry after the publication of the bestselling book Barbarians at the Gate. According to figures seen by the Financial Times, the private equity group has already returned €28bn to investors in Europe after carrying out 59 deals that required equity investment of €16bn.
Notable deals include the recent acquisition of Travelopia, the travel specialist, for around $407m, in the UK and a majority stake in GfK, the market research firm, in Nuremburg. Despite feverish activity, Mr Huth, an anti-Brexit campaigner who recently moved to Paris, says the sector faces a dilemma: to buy or to sell.
“We have a conundrum at the moment: the underlying portfolio we have is performing extremely well. [But] prices are creeping up. If you only look at the prices, you stay out of it,” explains the father of five. But he adds: “On the sell side, if you get a very attractive offer for an asset, certainly today I would take the money, which is happening on many auctions.”
He foresees dark clouds for the industry as a consequence of the election of Donald Trump as US president and the decision by the UK to break from the EU. “Brexit and Trump will have some effect, but it is not going to happen immediately,” he says. “Inflation in the UK is starting to move up. I think if that happens, it will have a negative effect on the economy.
“If you look at the US, it is harder to predict. Deregulation has a very positive impact, even in the US. We haven’t really seen meaningful change to long-term rates.” Those who know Mr Huth, know he won’t shy away from challenging times. One highlighted his “bloody-mindedness” as leader of KKR in Europe.
Emmanuel “Manny” Roman, chief executive of Pimco, the large US bond house, and a long-time friend, says: “He has a dry sense of humour and he is very German. He does what he says in business and friendships.”
Like other luminaries in his industry, Mr Huth is puzzled as to what will trigger downward market trading.
“The question is what will change the scenario that we are currently in, and it is relatively hard to see what will change it — a black-swan political event or a terrorist event or something like that,” he says. “Or the other thing that you can think of is a rate increase. It has to be something really quite substantial.” The Chelsea football club supporter is clear that a “meaningful” rise in rates will hurt private equity. “So much of what we are seeing now hinges around a low interest-rate environment,” he says.
“We can plan in terms of what will happen to rates and we can see that all portfolios are well hedged. Our industry will be affected by [rising rates].” Headwinds or not, Mr Huth is already looking to the future. He sees growth in KKR’s private equity division, but also in infrastructure and property. “There are areas within our business that could scale substantially,” he says, his mind still pregnant with deals.