Demonstrated Track Record in Turnarounds and Restructurings
Our investment strategy has proven successful and allows us to approach investing in Special Situations with confidence. KPS is recognized for creating vibrant and successful businesses out of assets or companies that were close to shutdown or liquidation, suffering from a history of severe operating losses, burdened with excessive debt or in default of obligations to creditors, or neglected by a parent that would not provide the capital, business focus or management necessary to achieve success.
KPS is one of the few private equity firms that focuses exclusively on acquiring control of assets or companies experiencing operational problems (including companies that are cash flow negative, with a history of recurring losses, and that require the installation of new management). KPS creates value through fundamental improvement in the business and operations of its portfolio companies, rather than relying on financial leverage or financial engineering to drive returns. Very few private equity firms have successfully demonstrated an ability to develop a business plan for the creation of a viable going concern out of a failed asset or company, source the financing required to purchase the company or assets, and install a new management team to execute a turnaround plan.
Experienced Investment Team
The continuity of the KPS team and our shared sense of purpose is a critical factor in our success. The Managing Partners of KPS have worked together since 1991. The entire KPS team operates as a cohesive and effective unit and collectively have developed a unique set of skills and substantial experience in turnarounds, restructurings, bankruptcies, Special Situation investing.
Certainty of Closure
Once we decide to pursue a transaction, we commit the capital, expertise and resources necessary to ensure that the transaction closes. Our focused investment strategy, track record, and commitment to efficient deal execution provide sellers and other constituencies with confidence that we will close the transactions we pursue. We have the ability to bridge large transactions to a close without relying on third-party financing.
Ability to Raise Significant Financing in Difficult Circumstances
KPS has successfully raised financing for companies in very difficult circumstances. Obtaining financing for Special Situations is a much more difficult and complex activity than obtaining financing for “plain vanilla” buyouts. We have raised significant amounts of financing to purchase companies or assets out of bankruptcy, to recapitalize companies with a history of recurring losses or financial underperformance, and to provide acquisition and working capital financing to new companies created by KPS with no history of operating as stand-alone entities.
KPS has strong relationships with a large number of investment and commercial banks, providers of mezzanine financing and other private equity funds.
Capitalizing on Market Inefficiencies
The market for Special Situations, especially assets or companies confronting difficult operating problems (versus simply financial) is generally inefficient and presents an opportunity to acquire businesses or assets at attractive values. The low level of understanding of this marketplace by the investment community coupled with the acute need for investment capital magnifies the buying power of the Fund and increases the opportunity to achieve superior investment returns.
Unique Transaction Sourcing
Unions consistently provide KPS with a significant number of quality investment opportunities because of our long history of working cooperatively with unions to sponsor successful buyouts and our constructive approach to investing in Special Situations. Investment opportunities referred by unions are generally not widely marketed or available to the broader investment community.
In addition, our broad network of relationships with workout and turnaround professionals, commercial and investment banks, law firms and other professionals involved in restructurings and bankruptcies provide us with a variety of unique opportunities.
Working Closely with Portfolio Companies
The closing of an investment transaction is only the beginning of the process of creating equity value. We are very involved investors who expend a significant amount of time and resources working with our management teams to build value in our portfolio companies. From the creation of a turnaround plan through its execution, KPS is involved on a real-time basis. We encourage our management teams to take a long-term perspective in building businesses and approve the expenditure of capital in a manner consistent with our overall investment strategy. Our professionals are continuously seeking follow-on acquisitions and growth opportunities for our portfolio companies, and we take the lead in connection with capital markets activities and financings.
