New York: KKR & Co. closed on a $1.45 billion inaugural fund targeting growth-stage health-care companies, solidifying yet another strategy for expanding beyond big-check deals.
The fourth-largest US private equity firm has been sprouting growth-stage investing efforts across various sectors. In December, KKR closed on $711 million to invest in fast-growing technology companies. Earlier Wednesday, the New York-based firm announced a plan to target middle-market industrial businesses.
Having the freedom to invest in younger or smaller firms alongside those more typical for large buyout funds will allow investors to deepen their knowledge base, tap into sourcing pipelines and participate in the quick-paced growth of those companies, said KKR partner Ali Satvat, who will head the new health-care pool. All the while, KKR will be able to offer those businesses a suite of relationships with other companies in its portfolio, he said.
The new pool also gives KKR more flexibility to invest thematically in promising growth businesses rather than passing up such opportunities when investing on behalf of its latest $13.9 billion buyout fund, Satvat said.
“If you’re a hammer looking for a nail, it’s different than if you can use any tool in the toolkit," Satvat said Wednesday in an interview, emphasizing that KKR views health-care growth investing as a lasting opportunity. “This is very much a long-term strategy. It’s by no means a dabbling exercise."
KKR’s fund, which included a $265 million commitment from the firm and its employees, has a flexible mandate to invest across health-care businesses such as diagnostics, medical devices and care providers. While KKR plans to avoid early stage companies subject to binary outcomes -- a drugmaker whose future is made or broken based on one clinical trial, for example -- it won’t be afraid to take on innovation risk when the right structures are in place, Satvat said.
“We’re interested in areas such as biopharma, which scares certain investors but can offer great opportunities if you choose the right asset, financing model and management team," Satvat said.
Some of KKR’s private equity peers also see opportunities in growth-stage health-care deals. Bain Capital closed on $720 million in May to pursue life-sciences investments, including high-growth companies. TPG’s growth funds have backed several health-care businesses.