There’s one less barbarian at the gate.
A top partner at Kohlberg & Co. is quitting the fray as the private-equity firm — which once shunned big buyouts in favor of smaller deals — looks to become a more aggressive player, The Post has learned.
Christopher Lacovara, one of two managing partners at the firm — founded by PE pioneer Jerome Kohlberg — gave up day-to-day duties last month after previously stepping down as co-head of the Mount Kisco, NY, firm.
His departure leaves Sam Frieder as the sole managing partner. Kohlberg’s son James is on the firm’s investment committee but isn’t involved in daily management.
According to a source close to the firm, Frieder is interested in modeling the firm after its more leveraged peers, while Lacovara wanted it to remain more conservative — a philosophical difference that contributed to the split.
If so, it would mark the second time a firm founded by Jerome Kohlberg — the first “K” in KKR — had lost a top partner over a disagreement in strategy.
Kohlberg quit Kohlberg, Kravis, Roberts & Co., now known as KKR, in 1987 after he feuded with partners Henry Kravis and George Roberts over the firm’s increasingly big, leveraged buyouts. KKR’s epic $25 billion battle for tobacco and food giant RJR Nabisco in 1989 was immortalized in the book “Barbarians at the Gate.”
It also raises the question of whether Kohlberg’s original vision for the firm — smaller deals with less debt — is sustainable in an industry that has thrived on leverage.
Kohlberg & Co. denied a rift between the former partners, saying Lacovara wanted to take his career in a new direction.
“There was no difference in investment philosophy between Sam and Chris,” said Kohlberg & Co. Chief Financial Officer Shant Mardirossian.
Lacovara, 48, who is toiling as a law clerk in Delaware after attending Columbia University Law School, wants to pursue advocacy work for community economic development.
“He just said, ‘Look, I want to do something different, and this is the time,’” Mardirossian said.
According to its own website, Kohlberg & Co. has “generally used a lower degree of financial leverage than that employed by many other private-equity firms, with a median debt-to-Ebitda ratio of three times.”
It appears that Kohlberg & Co. has increased its leverage with its last few buyouts. Mardirossian said the firm’s leverage on deals now ranges between 3.5 and four times debt-to-Ebidta, or earnings before interest, taxes, depreciation and amortization.
Typically, Kohlberg puts down 50 percent of the purchase price, with the target companies borrowing the rest to finance the deal. In its lone deal this year, the firm bought Aurora Casket, putting down 42 percent of the purchase price.
Last month, Kohlberg & Co.-owned Bauer Performance Sports, the world’s biggest hockey-stick maker, paid $64 million for Cascade hockey helmets. In a research report, a CIBC analyst said Bauer’s 3-to-1 leverage after the deal was at the upper end of the “comfort zone” and remains too high four years after it was acquired by Kohlberg & Co.
There’s speculation that Cascade will have to cut jobs at its Liverpool, NY, headquarters to lower costs. Mardirossian, who sits on the Bauer board, declined to comment on job cuts.