On May 1, 1976, Henry Kravis and his cousin, George Roberts, co-founded KKR with their mentor, Jerome Kohlberg, starting with just $120,000 in capital.

The trio left their positions at Bear Stearns to launch the firm with little more than an idea. Kravis and Roberts each contributed $10,000, while the more senior Kohlberg provided the remainder of the start-up capital. Reflecting on those early days in his 2024 My Personal History series published by Nikkei Asia, Henry Kravis recalled that the firm’s first investment fund totalled just $35 million.

“Now we had a firm and a plan. We just needed some actual business. Compared to today, we had a hard time finding a company to acquire. There was no internet. It was all very manual. We would basically just knock on doors,” he said.

In April, the firm, which inspired the book Barbarians at the Gate, knocked on the door of DCC House on the Leopardstown Road in South County Dublin, along with Energy Capital Partners. 

Development Capital Corporation, better-known as DCC, is a month older than KKR. Founded on April 9 1976, by Jim Flavin, it has made an indelible mark on modern Irish business. Flavin launched the business with the plan to provide development capital to private businesses that had great potential but were too risky for Ireland’s conservative banks. 

A brilliant and opportunistic dealmaker, Flavin built up the business until it was ready to list on the stock market in Dublin and London in May 1994 at a market capitalisation of IR£182 million (€231 million). 

It is a testament to Flavin and the chief executives who succeeded him – Tommy Breen and Donal Murphy – that DCC has become a takeover target, with a KKR-led consortium recently making a fresh £5.7 billion (€6.6 billion) approach for the company.

News of the consortium’s interest first surfaced on April 29 following a leak to Betaville, the private equity-focused news service run by journalist Ben Harrington. The source of the leak remains unknown, but it was hardly an ideal start to the process, forcing DCC to confirm it had received an initial approach before its board had formally rejected the proposal.

KKR and Energy Capital Partners’ new approach this week is 15 per cent higher than its previous proposal, and a 24 per cent premium to April 28, the day before the story broke. 

That DCC was going to be taken private by private equity has been inevitable for some time. 

Smartly, Murphy took the break-up of the conglomerate into his company’s hands by selling its healthcare and medical services division itself for €1.22 billion, before selling its information technology distribution business for €115 million. This meant Murphy could return cash from these sales to DCC’s shareholders. 

Once these sales closed, it was only a matter of time before PE called. 

Big rewards

For Flavin, who owns 3.2 per cent of DCC, he stands to gross more than €200 million if the deal goes through and he sells his shares. 

I’ve no idea of his personal tax circumstances or structuring, but this could trigger one of the largest individual capital gains tax bills in Irish corporate history, given he’s been a shareholder in the business since day one. 

It is not a bad problem to have for Flavin, who has made an enormous contribution to the Irish economy as well as shareholders by creating DCC. His successor Breen built upon his success, and should also be proud along with the management team from his era.

Murphy and his current team also stand to be well rewarded for their efforts. As The Irish Independent reported, his shares are worth £11.6 million. If he stays with the business under private-equity ownership, he could well make considerably more, free from the constraints of public-company pay scales. 

As Murphy told me in September 2024, a few months before he began the sell-off process, the future for DCC is in energy. 

“If we look back in 10 years’ time and we have succeeded and delivered on our objectives, we’ll have a phenomenal business that has really impacted climate-change issues for the better,” he said. 

Murphy is only 61 and has a strong team around him, whom any new buyer will want to keep together. 

As investment bank Berenberg has noted, it is by no means certain that KKR will ultimately acquire DCC. By being “minded to recommend” the improved offer, however, DCC’s board has effectively “fired the starting gun” on a meaningful sales process, one that could yet attract rival bidders.

Private equity is not known for sentimentality. Nor, for that matter, is DCC, which under three successive chief executives has demonstrated a consistent willingness to buy and sell businesses in pursuit of growth and shareholder value.

But if KKR does emerge as the successful bidder, it would provide a remarkable symmetry: Two companies founded in 1976, marking their 50th anniversaries by coming together in a deal worth billions.

Elsewhere last week…

With no experience, Damien Kelly and his wife Karla founded a traffic management company in London. In 10 years, it became one of the biggest in the south east of the UK. He talked to Alice about building up, cashing out, and tapping into the Irish construction network in London.

Dubliner Marc Hussey, head of JP Morgan in Ireland, emigrated in the 1980s. He discussed his dalliance with retirement, lessons from financing the reconstruction of Eastern Europe after the fall of the Berlin Wall, and Ireland’s transformation.

The debate over the Occupied Territories Bill and the future of Aughinish Alumina raises a question that policymakers can no longer avoid: How should Ireland balance legal obligations against economic and strategic realities? So said Dan in his column.