Jerome Kohlberg, Jr. (July 10, 1925 – July 30, 2015) was an American businessman and early pioneer in the private equity and leveraged buyout industries founding private equity firm Kohlberg Kravis Roberts & Co. and later Kohlberg & Company. By 1976, tensions had built up between Bear Stearns and the trio of Kohlberg, Kravis and Roberts leading to their departure and the formation of Kohlberg Kravis Roberts in that year. Most notably, Bear Stearns executive Cy Lewis had rejected repeated proposals to form a dedicated investment fund within Bear Stearns and Lewis took exception to the amount of time spent on outside activities. Early investors in KKR included the Hillman Family By 1978, with the revision of the ERISA regulations, the nascent KKR was successful in raising its first institutional fund with approximately $30 million of investor commitments. Kohlberg dabbles in philanthropy through the Kohlberg Foundation. He and his wife raise endangered free-ranged livestock and fish on their farm, and some of the produce goes to his wife’s restaurant, The Flying Pig, located in Mount Kisco, NY. With an estimated net worth of around $1.2 billion, he is ranked by Forbes as the 645-richest person in the world.Kohlberg joined Bear Stearns in 1955 where he would ultimately would manage the corporate finance department. Working for Bear Stearns in the late 1960s and early 1970s, Kohlberg, alongside Henry Kravis and George R. Roberts began a series of what they described as “bootstrap” investments. Their acquisition of Orkin Exterminating Company in 1964 is among the first significant leveraged buyout transactions. In the following years the three Bear Stearns bankers would complete a series of buyouts including Stern Metals (1965), Incom (a division of Rockwood International, 1971), Cobblers Industries (1971), and Boren Clay (1973) as well as Thompson Wire, Eagle Motors and Barrows through their investment in Stern Metals. Although they had a number of highly successful investments, the $27 million investment in Cobblers ended in bankruptcy. Kravis and his associates created a series of limited partnerships to acquire these various corporations, ones they judged were performing well below their sales and profit potential or where there were untapped financial assets that could be monetized. In most cases, Kohlberg Kravis Roberts & Co put up ten percent of the acquisition price from its own funds and borrowed the rest from investors by issuing high-yield bonds.
Kohlberg graduated from New Rochelle High School in New Rochelle, New York, before going on to earn an undergraduate degree from Swarthmore College. He later received degrees from Harvard Business School and Columbia Law School. In 1986, he founded the Philip Evans Scholarship Foundation at Swarthmore.
Jerome Kohlberg, Jr. (born July 10, 1925) is an American businessman and early pioneer in the private equity and leveraged buyout industries founding private equity firm Kohlberg Kravis Roberts & Co. and later Kohlberg & Company.In 1987, Jerome Kohlberg, Jr. resigned from KKR over differences in strategy, and Henry Kravis and George Roberts assumed full leadership of the firm. Kohlberg did not favor the large buyouts (which would likely have included the 1989 takeover of RJR Nabisco) or hostile takeovers. Instead, Kohlberg chose to return to his roots, acquiring smaller, middle-market companies and in 1987, he would found a new private equity firm Kohlberg & Company. As of the end of 2007, Kohlberg & Company had raised six private equity funds since its inception, with approximately $3.7 billion of investor commitments. Additionally, Kohlberg also operates a series of debt investment funds under the banner of Katonah Debt Advisors, as well as a publicly traded investment vehicle Kohlberg Capital (NASDAQ:KCAP)We use cookies and other data for a number of reasons, such as keeping FT Sites reliable and secure, personalising content and ads, providing social media features and to analyse how our Sites are used.
Jerome Kohlberg, Jr. was born in New York in 1925. He attended Swarthmore College in Swarthmore, Pennsylvania, then was called to serve in the U.S. Navy during World War II. After his discharge, he attended Harvard Business School, where he earned an MBA. He also earned a law degree from Columbia University. He came to Oregon after graduating from law school and clerked for Judge Gus Solomon of the U.S. District Court of Oregon. He and Nancy Seiffer were married in 1949; they later had four children. He joined Bear Stearns in 1955 and founded the Kohlberg, Kravis, Roberts investment firm (also known as KKR & Co.) in 1976. He died in 2015.
This oral history interview with Jerome Kohlberg, Jr. was conducted by Michael O’Rourke at the St. Regis Hotel in New York, New York, from May 19-20, 1999. In this interview, Kohlberg discusses his experiences as a law clerk for Judge Gus Solomon from 1952 to 1953, including some of the cases Solomon heard, and Solomon’s commitment to helping Jewish lawyers. He also briefly describes many of the lawyers and judges he met while in Portland, Oregon. He then talks about returning to New York to practice law and his continued relationship with Gus Solomon and Libby Solomon. He speaks at length about purchasing Fred Meyer in 1981 through his investment firm, Kohlberg, Kravis, Roberts (KKR & Co.), including his interactions with Fred G. Meyer, Oran B. Robertson, and Gerry Pratt. He closes the interview by briefly discussing how KKR has continued to manage Fred Meyer since its purchase.
The Oregon Historical Society is dedicated to making Oregon’s long, rich history visible and accessible to all. For more than a century, the Oregon Historical Society has served as the state’s collective memory, preserving a vast collection of artifacts, photographs, maps, manuscript materials, books, films, and oral histories. Our research library, museum, digital platform, educational programming, and historical journal make Oregon’s history open and accessible to all. We exist because history is powerful, and because a history as deep and rich as Oregon’s cannot be contained within a single story or point of view.This oral history interview with Jerome Kohlberg, Jr. was conducted by Jim Strassmaier at the Heathman Hotel in Portland, Oregon, on February 6, 1991. In this interview, Kohlberg discusses working as a law clerk for Judge Gus Solomon at the U.S. District Court of Oregon.
Jerome Kohlberg Jr. (July 10, 1925 – July 30, 2015) was an American businessman and investor. He was an early pioneer in the private equity and leveraged buyout industries founding private equity firm Kohlberg Kravis Roberts & Co. and later Kohlberg & Company.
In 1987 Kohlberg resigned from KKR over differences in strategy and Henry Kravis and George Roberts assumed full leadership of the firm. Kohlberg did not favor the large buyouts (which would likely have included the 1989 takeover of RJR Nabisco) or hostile takeovers. Instead, Kohlberg chose to return to his roots, acquiring smaller, middle-market companies and, in 1987, founded a new private equity firm Kohlberg & Company. As of the end of 2007 Kohlberg & Company had raised six private equity funds since its inception, with approximately $3.7 billion of investor commitments. Additionally, Kohlberg also operated a series of debt investment funds under the banner of Katonah Debt Advisors, as well as a publicly traded investment vehicle Kohlberg Capital (NASDAQ:KCAP). Kohlberg retired from Kohlberg & Company in 1994.By 1976 tensions had built up between Bear Stearns and the trio of Kohlberg, Kravis and Roberts leading to their departure and the formation of Kohlberg Kravis Roberts in that year. Most notably, Bear Stearns executive Cy Lewis had rejected repeated proposals to form a dedicated investment fund within Bear Stearns and Lewis took exception to the amount of time spent on outside activities. Early investors in KKR included the Hillman Family Group of Henry Hillman and the Hillman Company. By 1978, with the revision of the ERISA regulations, the nascent KKR was successful in raising its first institutional fund with approximately $30 million of investor commitments.Kohlberg was raised in a Jewish family graduating from New Rochelle High School in New Rochelle, New York. Kohlberg served in the United States Navy during World War II and went on to college and graduate school on the GI Bill. He earned an undergraduate degree from Swarthmore College. He later received an MBA from Harvard Business School and an LLB from Columbia Law School. In 1986, he founded the Philip Evans Scholarship Foundation at Swarthmore.Kohlberg joined Bear Stearns in 1955 where he would go on to manage the corporate finance department. Working for Bear Stearns in the late 1960s and early 1970s, Kohlberg, alongside Bear Stearns executives began advising a series of what they described as “bootstrap” investments. Their acquisition of Orkin Exterminating Company in 1964 is considered to have been among the first significant leveraged buyout transactions. In the following years the three Bear Stearns bankers would complete a series of buyouts including Stern Metals (1965), Incom (a division of Rockwood International, 1971), Cobblers Industries (1971), and Boren Clay (1973) as well as Thompson Wire, Eagle Motors and Barrows through their investment in Stern Metals. Although they had a number of highly successful investments, the $27 million investment in Cobblers ended in bankruptcy. Kravis and his associates created a series of limited partnerships to acquire these various corporations, ones they judged were performing well below their sales and profit potential or where there were untapped financial assets that could be monetized. In most cases, Kohlberg Kravis Roberts & Co put up ten percent of the acquisition price from its own funds and borrowed the rest from investors by issuing high-yield bonds.“I think the thing I brought to the buyout business more than anything else was the idea that management had to be an integral part of what we were doing,” Kohlberg said. “They had to have ownership in the business, something at stake. We made them buy stock and also gave them some options, so that they were on the same side of the table as we were.”
When Kohlberg decided to strike out on his own, Roberts and Kravis joined him. Kohlberg put up $100,000 in start-up funding; Roberts and Kravis each invested $10,000. Kohlberg Kravis Roberts opened its doors on 1 May 1976, in midtown Manhattan.In 1987, Kohlberg warned in a speech about the “overpowering greed that pervades our business life” and that it could “kill the golden goose’. Soon afterward, he withdrew as a general partner. With his son he created another buyout firm, Kohlberg and Co.
The firm pulled off several billion-dollar buyouts in the 1980s, including those of Wometco Enterprises, owner of cable systems and the CBS affiliate in Miami, for about $1 billion in 1984; the Beatrice Cos., a food processor, in 1986 for about $6 billion; and supermarket chain Safeway Stores Inc. in 1986 for about $4 billion.Following his retirement from Kohlberg and Co. in 1994, Kohlberg helped manage his family foundation. With Nancy, his wife, Kohlberg in 2010 purchased the Vineyard Gazette, a weekly newspaper on Martha’s Vineyard, from the family of James “Scotty” Reston, the longtime New York Times editor and columnist.
Kohlberg had become known as “Dr. No” inside the firm as his younger and more aggressive partners pressed for more deals and more staff, Bryan Burrough and John Helyar wrote in Barbarians at the Gate, their account of KKR’s 1989 acquisition of RJR Nabisco Inc. for $30.1 billion.
Though Kohlberg’s name remained on the partnership after his departure, the firm hasn’t celebrated his role in its history. “It was the partnership of our founders, Henry Kravis and George Roberts, that set the tone for KKR’s values and the way our firm would conduct business for decades to come,” according to the firm’s website.“I liked the idea of surviving on what you did, on what you were building with your own money,” Kohlberg told Eric J. Weiner for What Goes Up, a 2005 book about Wall Street’s history. “I didn’t want to just collect a fee or a commission.”
As of 1988, the firm had completed more than 35 buyouts worth more than $40 billion, earning billions of dollars in profits, The New York Times reported at the time.
The firm’s partners rose quickly into the ranks of America’s wealthy. Kohlberg spent several years on the Forbes list of 400 richest Americans, with an estimated wealth that reached $1.5 billion in 2007 and 2008.Kohlberg died on 30 July at his home in Martha’s Vineyard, according to The New York Times, citing his son, James. The cause was cancer, which was diagnosed two decades ago.
He began work on buyouts at Bear Stearns in the 1960s, when, he said, they were known as “bootstrap deals” and “buying anything with over 50 percent debt was ungentlemanly”. (JPMorgan Chase and Co. acquired Bear Stearns in 2008.)
Kravis and Roberts, who are cousins, worked under Kohlberg in Bear Stearns’ corporate finance division—Kravis in New York, Roberts in San Francisco. Kravis said the three were mostly left alone, since the firm’s other partners were interested in fees for closing deals, not acquiring long-term equity stakes in companies.
“Jerry was a real visionary, having played an important role in developing the private equity model in the 1960s, and he was a true mentor to George Roberts and me,” Kravis said in an emailed statement. Kohlberg was “a man of integrity and moral courage” who “gave freely of his time and wealth”, Roberts said in the statement.
George Anders, in Merchants of Debt: KKR and the Mortgaging of American Business (1992), wrote: “As his importance at KKR waned, Kohlberg turned angry and then bitter toward his younger partners. Kravis, determined to take the lead in the New York office, began to elbow his former mentor aside.” Expanding a practice they had begun at Bear Stearns, Kohlberg, Kravis and Roberts would borrow large sums from institutions such as pension funds and insurance companies to purchase underperforming companies from shareholders. They would typically retain management and cut staff, unload unprofitable assets and end costly perks such as private airplanes, then sell the company in whole or in pieces within several years. All was not happy inside KKR, however. In 1984, as the firm accelerated its deal-making, Kohlberg was sidelined for months after undergoing surgery for a benign brain tumour. Disagreements grew between Kohlberg and his younger partners about the firm’s direction. The final straw, by most accounts, was the Beatrice buyout, the firm’s first hostile takeover.The “spiritual father of the entire LBO industry,” as Fortune magazine called him, Kohlberg set out in 1976 to create an investment firm based not on earning commissions but on taking controlling equity stakes in companies at crossroads. He started the firm with Henry Kravis and George Roberts, two colleagues of his at Bear Stearns and Co. who were 18 years his junior.
Jerome Spiegel Kohlberg Jr. was born on 10 July 1925, and grew up in the New York City suburbs of Westchester County, where he attended public schools. He earned a bachelor’s degree from Swarthmore College in 1946 while participating in a US Navy officer training programme on campus. He later earned a law degree from Columbia University and a master’s degree in business administration from Harvard University.
Their 1979 purchase of Houdaille Industries, a maker of automobile and aircraft equipment, for about $370 million was the first buyout of a large company listed on the New York Stock Exchange.Subscribe or become a Friend of the Vineyard Gazette and receive our free newsletters and free and discounted tickets to Gazette events along with our award-winning news and photography.
He was educated in public schools and later enrolled at Swarthmore College, where he was a popular student and competitive athlete. He was inspired by the college’s Quaker philosophy; many years later when he joined the Swarthmore board of trustees he described himself as the college’s first Jewish Quaker.
In 1976 he founded Kohlberg, Kravis, Roberts and Co., partnering with Henry Kravis and George Roberts, two younger cousins who had begun their careers under his mentorship. He put up his own money to start the company and agreed to guarantee the salaries of his partners given the risk involved.
In 1983 Mr. Kohlberg was diagnosed with acoustic neuroma, a type of brain tumor. Following surgery and a year of recovery, he returned to K.K.R. where he found the culture had changed for the worse. “His signature down-to-earth style and sense of fairness had been replaced with fast-paced hostile takeovers that included extra fees to enrich K.K.R. His whole philosophy of business, and life, was being challenged,” wrote Mr. Kunhardt.
In March 1987, Mr. Kohlberg left the company he had founded, stunning Wall Street with a final boardroom speech where he said in part: “We must all insist on ethical behavior or we will kill the golden goose.”
In addition to his wife Nancy, he is survived by four children, Karen Kohlberg Davis of Petersham, Pamela Kohlberg of Chestnut Hill, James A. Kohlberg of Portola Valley, Calif., and Andrew S. Kohlberg of Del Mar, Calif.; 12 grandchildren and three great-grandchildren.
He was remembered warmly this week by friends and acquaintances. “A wise, wise man,” said Sarah Bartlett, dean of the CUNY Graduate School of Journalism in New York who authored a book about K.K.R. and is a family friend. “He always asked the most insightful questions that always made you think harder about things you thought you knew the answers to.” She said his interest in journalism was piqued following the purchase of the Gazette. “Being able to help a local community paper play an essential role in community building — that was thrilling for him,” Ms. Bartlett said.
A lifelong athlete, he was a legendary figure at Chilmark Sunday softball, known for his skills at third as well as at the plate. “I played third up until I got too old, then I went to short, then to second as my arm gave out, but that took 50 years” he told former Gazette managing editor Lauren Martin in a 2010 personal interview as he was preparing to buy the newspaper.In a lifetime of accomplishments, he believed above all in doing the right thing. “To thine own self be true — I feel like I’ve heard Dad say it a hundred times,” his daughter Karen Kohlberg Davis said. Daughter Pamela Kohlberg added, “He felt moral issues came into everything.”
Davis Weinstock, a Chilmark resident who with his wife Betsy is a longtime family friend, remarked on Mr. Kohlberg’s extraordinary strength of character. “He was enormously interested in you no matter who you were,” Mr. Weinstock said. “He felt he already knew about himself; he not only didn’t need any hand holding as a friend but it was all about you. You had 100 per cent of his attention.”
He and his wife Nancy bought the Gazette nearly five years ago, marking a new chapter in the 164-year-old newspaper of record for the Island and continuing its ownership as a family-held, independent publishing entity. “My goal is to give back to the Vineyard and to the Gazette,” he said at the time.Jerome Kohlberg Jr., the private equity industry visionary who became one of Wall Street’s biggest critics, quiet philanthropist, family man and nimble third baseman on the Chilmark softball field, died July 30 at his home on Job’s Neck cove in Edgartown, surrounded by his family. Mr. Kohlberg, who was 90, had battled cancer for a number of years, attacking his illness the same way he lived his life, with toughness, piercing intelligence and sheer willpower. He spent 21 years at Bear Stearns, along the way developing a strong set of creative innovation skills in finance. “I had a dream that companies could be bought and investments made in undervalued businesses,” he told his friend Peter Kunhardt, who conducted an oral history with him, “where we as financiers would invest our own money, time and effort right along side the others and stand or fall on that. I loved the business of buying companies and helping them prosper.” He went on to found an independent investment company with his son James, retiring in 1994. He continued a wide array of philanthropic pursuits, from the corridors of Washington D.C. where he championed campaign finance reform, to the Vineyard where he backed education, conservation and sustainable farming initiatives.
He had summered on the Vineyard since the 1940s, first in Chilmark and later in Edgartown. David Flanders helped the Kohlbergs find their first piece of land in Chilmark and Emmett Carroll built them a house. Many years later he and Nancy bought part of what was formerly Pohogonot Farm and built their current home on a tranquil cove of the Edgartown Great Pond.
“The gap between Kohlberg and Kravis was widened by the stark difference in their lifestyles. Kohlberg was a homebody, married to the same woman for forty years. Money hadn’t changed him. He dressed simply, led a quiet family life, and spent his free time playing tennis or reading thick volumes of fiction or biography. His idea of entertaining was tossing a softball around on a Sunday afternoon and retiring early to read.”Adam Wilson, an Oak Bluffs resident and the Aquinnah town administrator, recalled the early years of softball at Toomey’s field in a comment published on the Gazette website this week. “Jerry loved playing third, the ‘hot’ corner,” Mr. Wilson wrote. “He had a floppy hat and wore granny glasses and always vowed that no ground ball would get past him (And none ever did). Arguments would always break out about players beating the throw to first or how far the mythical foul line went toward the house and driveway. Some of the arguments were quite heated. But Jerry was always viewed as being the wisest among us and his pleading to end an argument with, can we just play ball, would rule the day.
He and Nancy lived in Edgartown and at Cabbage Hill Farm in Mt. Kisco, N.Y. They bought the Gazette in November 2010 from the Reston family with great excitement for the future. “I want the Gazette to be a vibrant voice for the Vineyard community far into the future,” he said. In the interview with Ms. Martin, he reflected on the moment at hand. “I’ve never owned a newspaper and I probably won’t again,” he said. “We’ve got to keep this the kind of paper it has been: a country, sophisticated, wonderful paper on a unique Island with unique people.”
“I think if you went back to Toomey’s, you’d find Jerry standing there, glove, hat, glasses and all, just waiting for someone to hit him a ground ball.” Although few of the regulars knew, Jerry Kohlberg was the reason the field later got a fence and other improvements.In 1943, he joined the Navy, serving in Panama as a supply officer. After the war he used the GI Bill to attend Harvard Business and Columbia Law schools, and later fought to ensure veterans continued to receive education benefits. He married Nancy Seiffer in 1948; they had four children: Karen, Pam, Jim and Andy. After law school he clerked in Portland, Ore., for Gus Solomon, a federal district court judge who became a lifelong role model. In 1955 he left the law and headed for Wall Street. Jerome Spiegel Kohlberg Jr. was born on July 10, 1925, and grew up in New Rochelle, N.Y., a member of the generation whose outlook was shaped by the Depression. His father was in the import/export business, and his mother was a writer and charity worker who had a profound influence on him. “She, even more than my father, imbued in my brother and me a sense of values and ethics,” he said in an autobiography. “She stressed the importance of standing up for what is right.” As for the wisdom of the investment, he said: “This is a different kind of investment. It’s an investment in preserving something that’s worth preserving. Newspapers are an important part of democracy.”“Jerry was a real visionary, having played an important role in developing t
he private equity model in the 1960’s, and he was a true mentor to George Roberts and me,” Mr. Kravis said in a statement. He later attended Swarthmore College. The school’s Quaker philosophy inspired him enough to later call himself a “Jewish Quaker.” After a stint in the Navy, he earned degrees from Harvard Business School and Columbia Law School, helped in part by the G.I. Bill. By the time Mr. Kohlberg retired from the sector altogether in 1994, the leveraged-buyout business — since renamed “private equity” — was on its path to becoming immense, eventually making billionaires of Mr. Kravis and Mr. Roberts, as well as rivals like Stephen A. Schwarzman of the Blackstone Group and David Rubenstein of the Carlyle Group.Unable to come to an agreement on a role at the firm where he served as senior founding partner, Mr. Kohlberg left to form his own investment firm, Kohlberg & Company, in 1987, with his son James as co-founder. (James Kohlberg is a board member of The New York Times Company.)
Yet Mr. Kohlberg and his protégés grew apart, separated by philosophies over corporate strategy and lifestyle. Where Mr. Kravis and Mr. Roberts were willing to pursue large-scale, hostile takeovers, Mr. Kohlberg instead chose to focus on smaller deals, always on friendly terms.
Upon his retirement from Kohlberg & Company in 1994, Jerome Kohlberg focused in large part on philanthropy, including efforts to provide education for veterans of the wars in Iraq and Afghanistan. He also supported efforts to overhaul campaign finance laws, lending his backing to the McCain-Feingold legislation that passed in 2002.
Though the early years of the firm were sometimes lean, K.K.R.’s business model proved alluring, prompting a growing stream of competitors eager to reap huge profits from deals made with borrowed money.
After an attempt to form a leveraged-buyout group within Bear Stearns was rejected, the three men struck out on their own. With the help of eight investors, including Mr. Kravis’s father and Mr. Kohlberg’s $5 million nest egg, they set up Kohlberg Kravis Roberts & Company in Midtown Manhattan.While at Bear Stearns, Mr. Kohlberg became the mentor of two promising Wall Street types, the cousins Mr. Kravis and Mr. Roberts, who quickly took to this form of deal-making. But others at the firm began to grumble about the three spending too much time away from bread-and-butter business of the firm, investment banking.
