Company: Investor: Kohlberg Kravis Roberts (KKR) In Alliance Tire Group, buyout firm Kohlberg Kravis Roberts (KKR) is helping entrepreneur Yogesh Mahansaria scale the company up from where previous investor, Warburg Pincus, left off. Between 2005 and 2013, Warburg Pincus helped kickstart the company’s tyre business with an acquisition in Israel, another of a bankrupt company in the US, and in setting up a greenfield plant in Tirunelveli, Tamil Nadu, before selling its 80% stake to KKR in August 2013.
KKR is taking a proactive approach in Alliance, similar to what Warburg took. KKR is leveraging its global presence to help beef up sales in US and Europe, Alliance’s primary markets, and is removing bottlenecks at the company’s factories in India to improve productivity. “While Warburg’s inputs were mainly strategic, KKR is also engaging with us on an operational level,” says Mahansaria, who now owns 10% of Alliance.“Aswithanyyoungcompanythathasgrown very fast and through acquisitions, systems and processes lag a little.”
Two KKR employees are present at Alliance’s factories, helping the company ramp up capacity, and streamline systems and processes. For a time, Akhil Puri, India head of KKR’s Capstone (an operations team within the PE firm), also officiated as COO of Alliance after the earlier COO quit. “A global firm like us can really help the entrepreneur take this business to the next level in terms of operational excellence and penetrating the overseas markets even more,” says Sanjay Nayar, CEO of KKR India.
In the US, where Alliance is relatively younger, the challenge for the company is to expand its footprint, while in Europe, where it has a long history, the challenge is to increase wallet-share with customers. “They (KKR) have been able to engage across our plants in India and Israel, and sales teams in US and Europe, to help us speed up our growth plans,” says Mahansaria, who has followed the unusual model of being the minority promoter and ceding majority control to financial investors to take his business to the big league.
Alliance, which is privately held, has annual revenues of about $500 million (Rs 3,000 crore). It is currently ranked in the fifth or sixth position, globally, in off-highway tyres for agriculture and construction. Mahansaria wants to grow the business to $1 billion revenues organically and about $2-3 billion through acquisitions, moving to the number one or number two ranking globally.
This is where KKR’s inherent strengths can come into play—through its global network of connections of board members and CEOs, the PE major can help Alliance find the right acquisition opportunities. Additionally, it can act as the extended management team and help think through the deal funding and structuring.