This netted Johnson over $60 million and put millions more into the hands of executives, lawyers, and bankers involved in the deal.įinancial concepts from “Barbarians at the Gate” Leveraged Buyout (LBO)Ī leveraged buyout is a financial transaction where a company is purchased using a combination of equity and debt, and where the company’s cash flow is the collateral used to secure and repay the sum borrowed. (KKR) put in a winning $24.5 billion bid. This takeover was the peak of a wave of LBOs in the 1980s, and after a competitive bidding process, private equity firm Kohlberg Kravis Roberts & Co. What follows is the leveraged buyout (LBO) of RJR Nabisco, with a frenetic Wall Street bidding contest between members of the RJR Nabisco management, the investment banking firm Shearson Lehman Hutton, and the LBO firm Kohlberg, Roberts and Co, for the takeover of the company. Johnson as he merges two of America’s biggest brands in the 1980s, RJR and Nabisco, becoming the CEO and president of tobacco and food corporation RJR Nabisco. “Barbarians at the Gate” written by investigative journalists Bryan Burrough and John Helyar, follows Ross F. An exciting read, with valuable lessons which still apply to investors today. This book describes in detail the LBO and subsequent failure of the RJR Nabisco merger, and dives deeper into a Wall Street culture driven by greed and excess. It describes how the once benevolent business practice of leveraged buyouts (LBOs), morphed into something more sinister under the influence of Wall Street in the 1980s. “Barbarians at the Gate” is a book title which quickly became a catchphrase in the finance industry. This article written by Marie POFF (ESSEC Business School, Global Bachelor of Business Administration, 2020) analyzes the Barbarians at the gate book.
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