KKR&#x27;s Co-Head of Global Private Equity and Partner reveals the rigorous, long-term discipline required to drive real operational improvements.

The Hard Truth About Operational Excellence w/ KKR's Pete Stavros

Dry Powder: The Private Equity Podcast

# Full Transcript

**Podcast:** Dry Powder: The Private Equity Podcast

## Transcript

[SPEAKER_A] The reality is operational improvement and driving operational change is really hard, like really hard.

[SPEAKER_B] That's Pete Stavros, Global Co-Head of Private Equity at KKR. And if you ask Pete what it'll take to generate alpha in a more challenging environment, he'll come right back to some of the industry's fundamentals. They source proprietary deals and they drive real operational improvements. It may sound like what you'd hear from any number of fund managers until Pete starts unpacking the discipline required to make it actually work.

[SPEAKER_A] The senior folks on our team, they couldn't run a factory, but they come close.

[SPEAKER_B] Today on Dry Powder, we'll explore what a prototypical KKR deal really looks like, how their operational depth works in practice, and how the firm is navigating today's slower deal flow, tougher exits, and stretched LPs. I'm Hugh MacArthur, Chairman of Bain's Global Private Equity Practice, and this is Dry Powder. Pete, welcome to Dry Powder. It's a pleasure to have you on the show today.

[SPEAKER_A] Thanks for having me.

[SPEAKER_B] What are you seeing in market conditions today around dealmaking exits? What does the health of the private equity world look like from a buyout perspective?

[SPEAKER_A] Well, fundraising, I think, is difficult. You know, LPs feel stretched, feel overallocated to private markets, to alternatives. I think as many of your listeners will know, one of the mistakes our industry made was over-deploying in 2021 and 2022 when the 10-year was 1% and private market multiples were very high. That deal activity in '21, '22 was pretty centered on software as well. So it was, you know, kind of the wrong industry at the wrong time at the wrong valuation level. And, you know, our industry spent that money quickly, meaning lots of funds were raised in 2021 and they were spent in 18-24 months, and then they went back out to market asking LPs for more money. And LPs, for the most part, consented and re-upped. But now they're waiting for money back and saying, hey, I basically invested 2x what my normal commit would be over the last 5 years. Where's the money back? So fundraising's tough. New deal activity is slow. I mean, it depends on part of the world. You know, Europe is, I'd say, particularly slow.

[SPEAKER_B] Right.

[SPEAKER_A] US is pretty slow. Asia is doing fine. And exits are tougher to come by. You know, in '21, '22, if we had a great business, we'd have 8 bidders, you know, who were dying to own it. And now you get a few. So it's definitely a slow market, I would say, on all fronts. Now, our whole orientation towards the market is consistency. So we find a way to deploy 20% of our fund every year. So we have this real orientation towards linear pacing and we don't try and time the market on exit either. When we've accomplished 80% of what we came to do with the business, we head...

The Hard Truth About Operational Excellence w/ KKR's Pete Stavros

Transcript

Built for investment professionals

Every day you wait, your competitors are finding
edge in conversations you're not hearing.

The Hard Truth About Operational Excellence w/ KKR's Pete Stavros

Transcript

Built for investment professionals

Every day you wait, your competitors are findingedge in conversations you're not hearing.

Every day you wait, your competitors are finding
edge in conversations you're not hearing.