Barbarians of times past

Just finished Barbarians at the gate: The fall of RJR Nabisco, which could be described as "the mother of all case studies." (For those who didn’t hang around in the late 80s, it is about the first mega-LBO.) I did take a course with Michael Jensen, who provided much of the theoretical underpinning for the LBO craze, in 1991 – and I couldn’t quite get what all the fuss was about.

Anyway, the book is a fascinating story of monumental egos: How RJR management (in a company that produced cigarrettes and cookies) had 6 jet airplanes, called the RJR air force. There are scenes of investment banks Salomon and Drexel nearly tanking the whole deal because they couldn’t agree on who should be on the left side of the tombstone. Another LBO company, Forstmann and Little, dickering for a day over whether their press release should say that they had been "invited" or "welcomed" to bid for the company. The final chapters when deadlines are extended in 60 and 15 minute increments (with KKR being paid $45m to wait for one hour at one point) are priceless.

The book reads like a thriller, though it is a bit hard to remember who all the characters are. Anyway, it was fun to then open New York Times and read about how the LBO industry now is flush with cash, but is running out of companies to buy – and, not least, buyers for the pieces they want to shed once they have acquired them.

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