KKR reaches halfway toward mid-market fund target

KKR Ascendant Fund portcos will incorporate equity ownership plans.

KKR has eclipsed $2 billion in its fundraising efforts for its first dedicated fund targeting North American mid-market companies.

KKR unveiled KKR Ascendant Fund last year to complement its broader Americas platform by focusing on smaller size investments. The mid-market LP has become a popular focus for even the largest shops as debt markets remain shut at the larger end, forcing firms to go down market for deals. Many large firms over the years have carved out separate teams, and funds, to continue their pursuit of deals at the lower ends of the market.

Details about KKR Ascendant Fund were revealed in documents for Minnesota State Board of Investment’s May 15 investment advisory committee meeting. Buyouts reviewed the documents.

Minnesota’s investment staff recommended the system commit up to $200 million to KKR Ascendant, adding to the $1.9 billion in commitments raised as of Form D documents filed in April.

According to the documents, KKR Ascendant Fund has a $4 billion target. Bloomberg reported in 2022 that the fund could seek to raise as much as $5 billion.

KKR Ascendant will target companies between $200 million and $1 billion in enterprise value with less than $75 million in EBITDA, according to the documents. The fund plans on making control investments in companies and carve-outs.

According to the documents, the fund has an 11-year term along with two additional one-year extensions pending LP consent. The investment period is six years.

While KKR Ascendant will target companies across a wide array of sectors, already announced investments show some of its focus.

In 2022, KKR Ascendant acquired a majority stake in Alchemer, a customer experience software provider, along with establishing a new dental support organization by backing several mergers.

KKR also announced a $250 million investment in a platform to acquire and build businesses in the testing, inspection and certification industry, according to sister publication PE Hub

According to the documents, the fund will also incorporate employee ownership plans in its investments. KKR started to incorporate employee ownership plans in 2011 and has since expanded the process.

KKR won Buyouts’ Deal of the Year for the 2022 exit from CHI Overhead Doors, where employee ownership was cited as a key to the firm’s 10x return on its initial investment.