KKR agrees to buy private-fund administrator Gen II for $5.1 billion

KKR said late Monday that it agreed to buy Gen II Fund Services, which handles fund administration for private equity and other private-markets managers, in a deal that values the company at $5.1 billion including debt.

KKR is buying Gen II from Hg and General Atlantic, which co-led an investment in the company in 2020, and from other minority investors. The purchase runs through KKR's Core Private Equity strategy. The companies expect it to close in 2027, subject to regulatory approvals and other customary conditions, so for now it is a signed agreement rather than a completed sale. Steven Millner, Gen II's co-founder and chief executive, and his leadership team will keep running the business.

What Gen II does

Private funds hire administrators to handle accounting, financial reporting and communications with the investors who put money in. Gen II does that work and sells tax, compliance, treasury and technology services alongside it. The company says it serves more than 275 investment managers representing more than $2 trillion in assets. Its software includes Sensr, a suite of tools for fund managers, and a client portal called GenVū, and Hg said it worked with the company on automating client onboarding and bank reconciliations.

Millner founded Gen II in 2009 with Steven Alecia and Norman Leben. Since Hg and General Atlantic invested, the company says it has quadrupled both revenue and a key measure of operating profit, through its own growth and four acquisitions that took it into new sectors, asset classes and services.

Why KKR wants it

Chris Harrington, a KKR partner, said Gen II "is well positioned to benefit from the structural growth of private markets." The announcement said private-markets managers increasingly want scaled, technology-enabled services to deal with more complex fund structures, investor needs and regulation. KKR plans to expand Gen II in the U.S. and abroad, invest in Gen II's own technology and AI tools, and help set up an ownership program open to all Gen II employees.

The deal extends KKR's move into businesses that serve other investment firms. In May it closed its purchase of Arctos Partners, which provides capital to alternative asset managers and owns stakes in professional sports teams, and placed it in a new unit called KKR Solutions. KKR also pointed to its record in financial services, including an agreement to sell USI Insurance Services.

Where KKR stands

KKR managed $796 billion of assets at the end of June, up 16% from a year earlier, and raised $34 billion of new capital from clients in the second quarter, according to its results. Its shares were up about 1% at $90.84 at 2:30 p.m. ET on Tuesday, according to cnbc.com market data, giving the firm a market value of about $81.5 billion. The stock is about 37% below its 52-week high of $144.84, set last December, and about 10% above the low it touched in March. Blackstone and Apollo shares were about 34% and 25% below their own 52-week highs.

Morgan Stanley, Robert W. Baird and UBS advised the sellers, with Kirkland & Ellis as their legal adviser. Simpson Thacher & Bartlett advised KKR.