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Private equity pioneer Jerry Kohlberg passes away

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Jerry Kohlberg in 2008Photograph by Eduardo Contreras — ZUMAPRESS

Jerry Kohlberg, arguably the father of leveraged buyouts, passed away last Thursday from cancer at the age of 90.

Kohlberg led the corporate finance department of Bear Stearns during much of the 1960’s and early 1970’s, where his protegees included Henry Kravis and George Roberts. In addition to helping Bear Stearns clients raise equity and debt capital, Kohlberg developed something called the “bootstrap” deal, which used debt to help older company founders achieve liquidity. He and his team later expanded the model to include carve-outs of orphaned industrial product lines, before leaving Bear Stearns in 1976 (along with Kravis and Roberts) to pursue the strategy fulltime as Kohlberg Kravis Roberts & Co. (after Bear Stearns had refused their offer to form a dedicated in-house leveraged buyout group).

Kohlberg ultimately would leave KKR (KKR) in 1987, in a split that was portrayed amicably at the time but much more acrimoniously in the book Barbarians at the Gate (issues included everything from strategy to hours at the office to personality clashes).

He and his son would later form Kohlberg & Co., a smaller private equity firm where he still served as chairman at the time of his death. Notably, Kohlberg & Co. would focus on the sort of friendly (i.e., not-hostile) transactions that would later be emulated by almost the entire private equity market (including KKR).

“Jerry was a man of integrity and moral courage,” George Roberts said in a statement. “For many years, he was a friend and mentor to Henry and me. Jerry cared about people and gave freely of his time and wealth. Henry and I are proud that our firm’s name is Kohlberg Kravis Roberts. Jerry will be missed and remembered by many.”