Parthenon Capital to Buy Kroll Bond Rating Agency in $900 Million Deal

Based in New York, KBRA is one of nine firms recognized by the Securities and Exchange Commission as a national rating organization, whose role is to assess the creditworthiness of companies and evaluate bonds.

Parthenon is buying KBRA from a holding company of consumer-finance firm Sherman Financial Group LLC, which became KBRA’s majority owner in 2015.

Jules Kroll, who founded and later sold investigations and risk-management company Kroll Inc., started KBRA in 2010 when investors and regulators were criticizing the role played by the three leading credit-ratings firms— Moody’s Corp. , S&P Global Inc. and Fitch Ratings Inc.—in the wider misjudgment of the risk of bonds backed by subprime home loans before the 2007-08 financial crisis.

KBRA now has more than 400 employees across its five offices in the U.S. and Europe and has issued over 51,000 ratings, amounting to nearly $3 trillion in issuance.

KBRA has developed specialties in rating community and midsize banks, airports, consumer finance, commercial mortgage-backed securities, asset-backed securities and renewable-energy projects, among other areas. It also provides credit information and data through its analytics business.

“It’s really listening to what investors want that has helped us grow so much,” said KBRA Chief Executive Jim Nadler, who co-founded the company with Mr. Kroll and in 2017 took over the top spot from him. “We view this investment as a way to continue to provide more and better information for our real partners, which are the investors around the globe.”

While sales of credit-ratings firms are relatively uncommon, this is the second in recent years. In 2019, Morningstar Inc. bought Kroll rival DBRS Inc. for $669 million from private-equity firms Carlyle Group Inc. and Warburg Pincus LLC.

Meanwhile, some of the industry’s biggest players have been bulking up by acquiring data businesses. S&P agreed to buy IHS Markit Ltd. in a $44 billion deal last year, and Moody’s bought Dutch data provider Bureau van Dijk for about $3.3 billion in 2017.

With offices in Boston, San Francisco and Austin, Texas, Parthenon invests in rapidly growing companies with a particular focus on healthcare, financial and insurance services and technology services. Founded in 1998, it has managed funds with over $5.5 billion in total capital commitments, according to its website.

Write to Miriam Gottfried at [email protected]