Impressive, kept my interest despite the objectively stiff subject matter. ( )

Good storytelling for a finance book. At the end of the day, still a finance book so not super interesting. Learned a lot though and the CEO Ross Johnson. was an interesting character. Fun to read when the LBO bidding occurred. ( )

Rated: B
Fascinating account of the LBO of RJR Nabisco which was the largest of its day. The offers were driven by competing egos and arrogance for the sake of pride and greed. Great win for shareholders. Only fair return for investors. Utter destruction of a company culture with the fall of RJR. When people are critical of Corporate American and Wall Street, this history serves as an example of the need for greed. ( )

The brilliantly-written, tragicomic account of the leveraged buy-out of RJR Nabisco in 1988. Very few, if any, of the players come out in a positive light, and there are times when you seriously wonder if there are any adults in the room. The tragedy, to a certain extent, goes to the workers on the sidelines of the transaction, which did not turn out well for many. Recommended. ( )

The book is about the leveraged buyout of the RJR Nabisco, one of the largest deals during the LBOs of the 1980s. From practicing attorneys, it sounds like this book is more interesting history than illustrative of modern times, but I would recommend the read as entertaining regardless.

The book is relatively long, and at points drags a little, with excessive detail over trivial matters (the decoration and furnishings of various power players gets annoying the third time you read about it). However, once I got past the first half it was really hard to put down the book. There were at least two nights where I was up into the early AM reading this book instead of sleeping or reading my case books. The first half of the book can probably be characterized as background setting up the deal which occurs around the middle of the book. The authors meticulously collect anecdotes and background on the key players (there are so many it's hard to keep track of who is who sometimes, but the authors helpfully include a list in the front of the book and usually include some description to indicate who the player is) that suggest the various motivations and incentives of the players. There's also a fair amount of background information on the major companies involved, including RJR and Nabisco showing how far removed the machinations of management, the board and outsider bidders were from actual operations and building the businesses that the deals were around.

What makes the deal so interesting are that personalities driving the bidding process, the various back stabbings, press leaks, rumors and power plays of the entire ordeal. The process had a few main players, the special committee that would recommend the winning bid to the board, the management team, the Kravis team, Ted Forstmann's team, and First Boston. The management team was headed by RJR Nabisco's CEO, Ross Johnson, who was better at executive power plays (climbing from the head of a Canadian food company to the head of RJR Nabisco through political moves of threatening to resign until he was appointed CEO, schmoozing the correct people, sensing weaknesses and then cutting people off at the knees), spending money on corporate jets, and rubbing shoulders with celebrities than operating the business. It's clear from the book that Johnson who initiated the entire deal was like to stir things up (partially to take his mind off of his son's accident), liked to see everyone win and thought he was doing the only thing possible to give shareholders the correct value of the stock price (he felt like the market was unfairly treating RJR Nabisco like a tobacco stock). There's various double crossings, misunderstandings and miscommunications that lead the management team, and the Kravis team into a bidding war. While Kravis at first wished to work with management, the management team's bankers did not want to work with Kravis, leading Kravis to make a bid. While there were times that management and Kravis seemed to agree to work together, but any agreement was scuttled by the conflict between their bankers Drexel and Salomon. Eventually, Kravis working without internal data was outbid by a substantial amount by management but both were outbid by a hail mary bid from First Boston, who touted a crazy tax plan that justify the bid. The bidders then entered a second round, where First Boston failed to put together the logistics for their bid. Kravis, giving off the impression (either unintentionally or intentionally) that he was not going to bid, actually bid even higher than the past management bid and beat the second round bid. Once management found out, they insisted on rebidding. Eventually the board found both bids to be similar but choose the Kravis bid because of a few minor changes that the management team bankers refused to make, and possibly because they found Johnson's management agreement (which its bankers swore would be renegotiated but then was leaked, potentially by one of Kravis's bankers during management team/Kravis negotiations) insulting.

The deals, incentives and conflicts of loyalty are complicated and well detailed in the book. To me the deal is an interesting example of game theory and incentives. Clearly the special committee had an interest in keeping bidders active in competing against each other. The bidders had an incentive to cut a deal and split the gains but personality clashes and institutional barriers kept a deal from happening (to the benefit of the shareholder and the board). Additionally, the management's advantage, access and cooperation of the head of the company was a huge advantage over Kravis who had to bid blind. The book was also an interesting lesson in auction process, Kravis kept threatening to walk in order to keep the pressure up, and management was able to wedge in a last minute bid because the special committee had an obligation to hear the best bid and the procedure was unclear on ending the auction process. The deal is an interesting lesson on the best laid plans of mice and men. Management would have won the first bidding round if First Boston did not lob its mary hail bid (giving Kravis a second chance). The crosses of conflict of interest and personality clashes (Ted Forstmann hated Kravis and felt mistreated by the management team for example) drove the dynamics of the deal as much as any rational analysis did. In the end, the deal was also an interesting example of the winner's curse. Kravis ended up not profiting off the deal, while First Boston and Ted Forstmann took off after losing the deal. Kravis ended up selling RJR Nabisco, which could not split up until RJR settled its tobacco liability through a master settlement (driven by a need to split and spearheaded by the lawyer turned CEO that advised Johnson). Johnson ended up fine as well, while he lost his position as CEO, he retired comfortably and lived off of his over 50 million golden parachute. A fascinating story. ( )

I can’t put it any better than the New York Times did: “One of the greatest business books ever written.” ( )

The fascinating story of the leveraged buy-out of RJR Nabisco in 1989. The authors do a great job of building up the backgrounds of the various players. There are lots of people involved and lots of details but the authors keep things straight so the story is not too hard to follow. Mostly I could keep the names straight though a few times I just gave up but in those cases it didn't make much difference anyway.

These are Wall Street Journal reporters. They outline the financial intricacies well enough so the story hangs together. What we never really get is any kind of reflection on the significance of the wild story. The extravagance, the waste... this is a much earlier phase of the kind of crazy financial engineering and concentration of wealth, the trend that has continued and grown over the twenty five years since this story unfolded. The book came out quite soon after the events so that already limits what kind of historical reflection would have been possible.

Definitely worthwhile snapshot of corporate craziness! ( )

One of my favorite financial reads. The sheer audacity on display by the prime players in this real world tale defies belief. It's men at their greediest and it's impossible to pull away from the story the whole way through. The book is largely accessible, but does require an understanding of arbitrage and other financial constructs at times. Still, these are not reasons to avoid reading this book, especially if you have any interest in finance or wicked deeds done regularly in the financial world. Bottom line: read this. ( )

An amazing story and a great book. Seems like no matter how much things change, they're very much still the same. ( )

I just finished reading the iBooks version of “Barbarians at the Gate: The Fall of RJR Nabisco,” at 763 pages in my edition. Written in 1989 by two Wall Street Journal reporters - Bryan Burrough and John Helyar - the book recounts the 1988 leveraged buyout of RJR Nabisco by KKR & Co. L. P. This event represents the pinnacle of business culture in the Roaring Eighties.

The book begins with the history of the two sides of the company. I’ll review their early history here, as it’s particularly interesting.

Nabisco

Nabisco [the National Biscuit Company] was founded in 1898 by the Chicago lawyer Adolphus Green through the merger of East and West Coast competitors. Nabisco’s created the first widely-adopted processed food in the US - crackers - and was known as the biscuit trust. It ran an an “associate proprietor” system that allowed employees to buy into the company.

RJ Reynolds

Reynolds was founded in 1875 by RJ Reynolds in Winston-Salem, NC. It’s employees there were primarily members of the Moravian Church. Reynolds was known to keep busy; “At an 1890 meeting of the Reynolds board, directors authorized spending $240 a year for Reynold’s horse team, the equivalent of today’s corporate jet” [69]. Wachovia Bank was one of their early allies.

In 1899, Buck Duke, a NYC guy, bought two thirds of Reynolds. They used the firepower to become the biggest employer in North Carolina.

F. Ross Johnson

Johnson is the protagonist of the book. A Canadian, the story follows him through his various positions in the corporate world, eventually landing him as the CEO of RJR Nabisco. Johnson was known as a noncompany man, and had a “personal crusade against specialization” [47]. He would tell his management, "you don’t have a job, you have an assignment" [48]. He also knew the rules of duopoly; "you know, it just doesn’t make sense to have anything that’s not number one or number two in its industry" [61]. His motto was, "a few million dollars are lost in the sands of time," and he was know for his "RJR Air Force" of corporate jets. By the end of the buyout, he’d learned the Three rules of Wall Street: “Never play by the ruse. Never pay in cash. And never tell the truth” [675].

Leveraged Buyouts

The leveraged buyout [LBO]- buying an undervalued conglomerate to be reorganized and sold at a profit while using the company as collateral and creating massive amounts of debt - is the key concept in the book.

Although KKR pioneered LBOs, the first famous one that got everybody on the bandwagon was in 1982 - Gibson Greetings. KKR was the king of LBOs, so let’s review their history.

KKR

KKR was founded in 1976 by Jerry Kohlberg, Henry Kravis, and George Roberts. The three got kicked out of Bear Sterns, a trader, for getting into LBOs into the seventies. So they started their own firm. Kohlberg was twenty years senior of Kravis and Roberts, and served as a mentor to them in their early years. By the mid eighties, things in their partnership were shifting. Kohlberg had some heath issues that took him out for a while, and he was traditional, when Kravis and Roberts were aggressive. Kohlberg was known as “Dr. No,” as he’d always be the brakes on the operation.

By the time of RJR Nabisco, Kohlberg had left and started his own thing, although he still had significant financial ties to KKR.

Key Terms
* Bridge loan - a short-term loan used for capital while longer-term loans are worked out
* Merchant banking - providing capital through shares rather than loans
* Tender offer - a public form of takeover bid
* Toehold investment - when a firm acquires a significant stake in a company that they’re about to attempt to buyout
* PIK - Pay-in-kind loans use other forms of securities than cash

Reflections

Right before Johnson started things rolling with an LBO, his son went into a coma [due to a car accident]. It’s worth noting that Johnson didn’t have the psychological support or skill set to deal with this trauma in any other way than diving into his work - in this case, laying the groundwork for the biggest LBO in history.

I didn’t see any points in this event associated with outlandish greed. What can be found in this story is a description of the concentration of power. So although these people weren’t unusually greedy for the average American, they were dealing with some pretty big numbers that had immediate impact on many peoples lives.

Another shortcoming in the development of many of the core characters in the story is a lack of initiation into adulthood. There is some spirit of competition. It’s clear that there wasn’t an interest in the leaders in this book making decisions that are particularly in the “best” interests of themselves or their communities. They just wanted to “win.” This is an adolescent attribute. It’s both sad and irresponsible that our society places people of such deficient maturity in these roles of power.

There’s also a disconnect between the personal and professional lives of many people in the story. On the one hand, many people in the book care deeply for quality in their personal life. They might have hand-made Italian loafers, fine art on their walls, and eat at delicious restaurants almost every night of the week. I associate these things with the values of attention to detail, presence, and beauty.

On the other hand, their professional lives are a mess. Things are flying all over the place all the times. Deals are thrown together in haphazard jumbles that often require significant restructuring down the road. I’m not sure what the values are here, but they’re not associated with quality.

That being said, their lifestyles are pretty genuine. It’s all about relationships. Their schedule looks nothing like the nine-to-five. They spend a lot of their time socializing, and hanging out in cool places. Most Wall Street deals seem to take place over drinks at somebody’s penthouse apartment at 3:00am, or on the golf course, or at a ski resort.

There’s an undercurrent of warfare. Whenever somebody in the book served in the military, which many of them did, their history was reviewed, and how it informed their behavior.

LBOs definitely operate in a very special ecosystem. Although there were just a handful of people calling the shots, they drew on vast arrays of specialized resources [accountants, lawyers, pension funds, junk bonds, et cetera].

In summary, I found the book extremely interesting. ( )

This is a book about money and boardroom diplomacy. When the two mix, it ends up drawing greedy, needy men into something like a gold-plated bar-room brawl. It is a fascinating, readable and highly believable account of one of the largest LBO's of the 1980s. ( )

A really interesting and detailed account of some the biggest players and biggest companies in their time. Highly recommended for anyone interested in big business or corporate finance maneuvering. ( )

An exhausistively researched and immensely entertaining of the RJR Nabisco leveraged buyout. At about five hundred pages, its attention to detail is truly breath-taking. Burroughs and Helyar provide insightful, detailed biographies of every major player involved in this deal, histories of each of the companies involved, and seem to have cross-examined their sources about the smallest details of how the takeover bids were put together. "Barbarians" serves as a straight-faced condemnation of eighties-era takeover mania and also illustrates a broader cultural shift that saw quiet, respectable businessmen pushed aside in favor of flashy, self-aggrandizing showmen obsessed with their perks, their bonuses, and their public image. In F. Ross Johnson, RJR Nabisco's shallow, incompetent, buffoonish CEO, Burrough gives us a villain for the ages. The fact that this embodiment of Reagan-era greed walked away from this fiasco fifty million dollars richer, received something called the "United States Silver Medal of Patriotism," and sits on Duke University's Board of Trustees is more proof, as if anybody needed any, that life just isn't fair.

Burroughs, a former Wall Street Journal reporter, knows this territory intimately and seems much more comfortable relating this story than he was talking about John Dillinger's escapades in "Public Enemies." It helps that he knows that he's got a terrific yarn on his hands and he works to keep the book's tempo on "high" from start to finish. This isn't to say that this story's always easy to keep track of. The financial transactions that Burrough describes are complex, and some of the financial slight-of-hand employed by this book's protagonists is positively Byzantine. I often found myself turning to the much-needed "Cast of Characters" that's included in the book's first few pages. Still, Burrough is careful to explain the basics of LBOs and other esoteric financial transactions in language that the average reader can understand, and he's not afraid to let his readers know when the details of a certain deal are best left to the real experts. His privileging of plot over financial nuance pays off handsomely: "Barbarians" is as addictive a book as I've ever had the pleasure to read. Burrough and Helyar's book is a fantastic piece of journalism and is highly recommended. ( )

Must read to understand how ego, greed and human factors make up the "invisible hand of the market" ( )

OK, first - this is a truly ripping yarn. There's enough corporate intrigue, maniacal boardroom posturing, gulfstream abuse and small men with big egos in these riveting 600 pages to knock even the Ewing family of Dallas into a cocked hat. From the beginning Burrough draws you into the preposterousness of what is happening, setting out well drawn characterisations of each of the main players, flipping between them in that totally enchanting "meanwhile, in Gotham city" fashion. Before long the threads are pulling together into a whirling tarantella of greed assaulting you from every side. It's difficult to work out who's meant to be the villain, mostly because I think everyone was. Full grown men startle for their utter failure in self-reflexion as much as for the appalling lengths to which they will go in the name of self-interest.
The climax is as good as any thriller (I completely missed my stop on the tube, finally snapping out of a daze thinking, "hey I haven't been this excited since Jodi Foster went head to head with Buffalo Bill in Silence Of The Lambs!").

Secondly, and maybe not intentionally, Barbarians at the Gate is a piercing social/historical commentary - just by "telling it like it was" the narrative skewers the eighties, Wall street and the Reagan years so brutally it might as well be a spit roast.

On this level it is leagues ahead of the celebrated fictional works which purport to do the same thing. In particular, Brett Ellis' "American Psycho", and Tom Wolfe's "A Man in Full", fare badly against Burrough's genuine article. I would be amazed of either Ellis or Wolfe hadn't read this book, but the novels of both are anemic and implausible in comparison. Barbarians at the Gate is more deadly accurate, it doesn't exagerrate or caricature the wall street banker like American Psycho does (and what value is there in caricaturing something which is so patently ridiculous in itself?), and the plot - needless to say - has a ring of credibility which is singularly lacking from A Man In Full.

Oddly, the one area where the book falls down a little bit is in its aspiration (if it has one) to present a sensible, clear, commercial analysis of what was going on. But that's a trade off - had the Burroughs taken that route, then surely some of the dramatic impact would have been lost.

As it is, he's produced a cracker. ( )

Best I've read on LBOs; Wall Street

I reread this book a lot just to get a sense of how out of control our money managers can be. Compelling story, particularly if you enjoy reading about both sleazy and upright managers and mismanagement. And, once you've read it, you'll understand a bit more how these guys set up the economic mess we're in now. ( )

Bryan Burrough: Special Correspondent at Vanity Fair magazine, a former Wall Street Journal reporter and three-time winner of the prestigious Gerald Loeb Award for journalism.
Pros: very engaging story telling; glimpse of the inner working of boardrooms and corporations
Cons: a bit too intelligence-insulting on "good" intentions of all the parties; white-wash treatment of the whole thing ( )

One of the classic business stories, about the huge and controversial Leveraged buy-out of RJR Nabisco that came to symbolise the eighties. A little disappointing that this later edition doesn't have any analysis looking back on the deal from two decades later, but it's still a good book on a great story. Hubris doesn't come more expensive than this! ( )

After Liars Poker, the second-most likely book to be read by wannabe investment-banker undergraduates. ( )

2417 Barbarians at the Gate: The Fall of RJR Nabisco, by Bryan Burrough and John Helyar (read 31 Oct 1991) This is an amazing 1990 book on the leveraged buyout of RJR Nabisco in 1988. I really didn't follow that event much as it was going on, but these authors have made a fascinating, hard-to-stop reading book out of it. My most serious objection to the book is the great delight the authors have in spelling out every obscene scatological remark people are supposed to have said. Ross Johnson, head of RJR Nabisco, appears to me to be a despicable guy--his lavish spending ways really turned me off. It is a whole different world--high business and Wall Street--and I don't feel sorry I've never had anything to do with it. I much prefer my life style. Sour grapes? I don't think so. ( )

See also papers in SH Archive Financial Institutions box 3.

Helyar, John (Author); RJR Nabisco (Subject)

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