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87 of 91 people found the following review helpful
on July 21, 2003
Burrough and Helyar are two former Wall Street Journal reporters who present a comprehensive telling of the battle for control of RJR Nabisco, ultimately won by KKR, led by Henry Kravis in 1988. The book was written in 1990 and provided the final chapter on the LBO excesses of the 1980's. By 1990, the stock market rally had made LBO's less attractive and some of the earlier deals were already starting to unravel and collapse under the weight of the debt payments, as predicted by long-time junk bond critic and rival RJR Nabisco bidder Ted Forstmann.
There are some criticisms of this book. The authors, despite their finanical backgrounds, seem to prefer story-telling to financial details. Hence, they have written a tale of personalities, with an especial interest in Ross Johnson and Henry Kravis, to the detriment of really explaining the financial and business details. The reader can learn intricate details about Johnson and the Wall Streeters preferences in cars, apartments, drinks, wives, schoos, etc. The authors seem to think we need a biographic account of all minor players, starting with their grade-school years, and the end result is 528 pages and still minimal financial explanation.
The other main criticism here, reading this now, is how dated the material has become. The authors would do well to provide some new material on how the deal has worked out. From other sources, I learned that KKR renegotiated the deal in the early 1990's (the resets were nearly toxic after all) and sold out their position entirely in 1995, more or less breaking even, depending on whose numbers you use.
The story of the final bids and the final final bids is truly riveting and meticulously researched here. The Johnson group ultimately presents a bid that is slightly higher than the KKR bid, but the board discounts the Johnson bid since it does not guarantee the bond pricing, and calls the whole thing a tie, much like the 2000 election. At that point, the Board accepts the KKR bid, for non-economic reasons, mostly bad publicity related to Johnson's greed. Ironically, Johnson had already given up much of his payout in order to boost the total value of the bid to the shareholders.
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70 of 78 people found the following review helpful
I am a management consultant who works with companies that are interested in improving stock price, and I know many of the more humble people portrayed in BARBARIANS AT THE GATE.
I would like to put this book into perspective for you. 20 years ago our firm did a survey of CEOs and found that 99 percent felt that trying to improve stock price was unethical and immoral, and involved doing manipulative things.
After the takeover wars of the 1980s, most CEOs believed that improving stock price was an important task and could be done in an ethical way. There is nothing more disruptive to a company than to go through a hostile takeover, whether the bid succeeds or not. Raw greed and lust for power hold sway at such times, and many people will pay the price for having attracted the sharks into their swimming pool.
Prior to the RJR Nabisco purchase by KKR, many large companies felt safe because of their size. They were suffering from "stalled" thinking, because it was widely believed that a deal of this sort could not be financed with debt at the time the takeover occurred. That was wrong: For a price, the money is always there.
For those who have not been in these bruising ego battles, what you will not realize is that these contests are a lot like those you will remember from grade school on the playground when the teachers were not around. Bullying, threats, and naked power carry the day in a lot of situations. But because this is about ego, a lot of mistakes are made. RJR Nabisco continued to strain under mountains of debt for years, even after lots of refinancings because of the LBO.
KKR's track record looks a lot different now than it did before buying RJR Nabisco. A lot of the fever behind the LBO's is gone, for now. Bring back a bear market for a few years, and this whole phenomena will recur. Some smart lawyer will find a way around the defenses that so many rely on for now. The only ultimate defense against the circling sharks is to have a high-priced multiple stock. That is the only timeless lesson for companies.
If you are wondering how accurate this book is, it is more right than wrong. The authors did, however, miss some of the most intriguing ironies of the situation. Perhaps someday, someone with inside knowledge will write the sequel or unveil the whole, delicious irony. That should be a great story that will outsell GONE WITH THE WIND.
With the benefit of this context, I do recommend you read the book. You'll find it stranger than fiction in many ways, and very exciting to watch. The authors have captured the emotion of the moment very well. It's a whale of a story.
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19 of 19 people found the following review helpful
on September 6, 2001
"Barbarians at the Gate" is a very easy, fun read. It is purposefully written alot like a novel. For one thing, the book shifts frequently between different times and places. For instance, the prologue details the board meeting where CEO Ross Johnson proposes a Leveraged Buy Out (LBO) for the first time. The start of chapter 7, page 184, then picks up from there chronologically, "Johnson rose early the next morning, the memory of Wednesday night's board meeting still fresh in his mind" (pg 184). Also like a novel, the authors give a tremendous amount of background and personal history on the people and companies involved in the deal. There is history about Ross Johnson's personal history, about his time at Standard Brands and Nabisco before the merger with RJR, and then about RJR the company, dating back to the 1800s. There is also a chapter that goes into some detail about KKR and Henry Kravis. All of the information was interesting and well written, though I felt at times like I just wanted to get back to the main plot and away from some of these tangenital details. It was a choice the authors made between making the book more journalistic and conise or more like a novel, and I guess I ended up liking their choice.
The heart of the book is the bidding battle for RJR between KKR and the Shearson Lehman Group (which had Johnson on their side); First Boston also makes a bid but I don't think their bid was ever seriously, seriously considered. The authors describe an LBO as follows, "A firm such as Kohlberg Kravis, working with a company's management, buys the company using money raised from BANKS and the PUBLIC SALE OF SECURITIES; the DEBT IS PAID DOWN WITH CASH FROM THE COMPANY'S OPERATIONS and, often, by SELLING PIECES OF THE BUSINESS" (pg 101). So that is how KKR and the LBOs work. The book takes you through the day by day strategy sessions of the different groups, their attempts to raise financing (equity from private investors, junk bonds issued by the investment banks, and commercial bank loans), their responses to moves from the other side, the meetings of the Special Comittee which would decide which bid to accept, etc.... There are alot of late nights, alot of re-crunching the numbers, alot of personality clashes, lawyers, investment bankers, and more. The writing was so good that it made me feel like I was there, following the deal step by step, and gaining an understanding of what the various parties do and what goes on in an LBO. It was like reading a story and learning about LBOs and how big deals get made at the same time. Very rewarding. I usually don't like books to be this long (515 pgs) but in this case I think almost every pages was worth it.
Greg Feirman
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40 of 45 people found the following review helpful
on June 25, 2001
The dot-com stock market insanity of 1999, followed by the dot-bomb fall in 2000, is eerily mirrored in this book from a decade earlier about big money, big egos, and raging insanity.
Burroughs and Helyar tell the story of the leveraged buyout of RJR Nabisco in gripping fashion, showing how greed and shortsightedness contributed to the biggest and worst-managed corporate takeover in history. The players: Salesman F. Ross Johnson of RJR vs. Henry Kravitz of KKR. Everything from a wild, rip-roaring potboiler novel is here: Secret deals, stock market manipulation, flouting of laws, surprise plot twists. All of it almost unbelievable, but all of it true.
The next time you wonder about how people could have been taken in by internet companies with insane stock prices who blew through venture capital as if it were funny money, read this book. It's well worth your time, effort, and energy.
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12 of 13 people found the following review helpful
on February 28, 2007
This is a great history lesson about what for nearly twenty years was been largest private equity transaction in terms of a nominal value(from an equity perspective). It describes many of the events & facts, background on key players & the industry, and let's a reader understand the motivating factors that allow such a transaction to take place.

That said, the WSJ writers do not do justice to their profession with this work and it became from a documentary of events to a story. Much of the information of the on-goings of the transaction was provided by Dick Beattie, a Sullivan & Cromwell attorney (which represented Lehman) who had a strong personal relationship with Kravis and Roberts. The writers took his word as fact and the book became an avenue for Kravis to publicly insult and humiliate his archnemesis Ted Forstmann, former mentor Jerome Kohlberg, Lehman rival Peter Cohen, among others.

Add to this the avoidance of facts, such as how KKR quietly removed covenants from its LP agreements limiting the percentage of fund capital that can be deployed for any single transactions and the near zero return on investment that RJR Nabisco provided over one the largest equity market increases and a reader must begin to question why there isn't an addendum quantifying this tremendous mistake on KKR's part.

This book would have been rated a five had the authors focused on the facts.
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7 of 7 people found the following review helpful
on July 9, 2007
This book, written in 1990, tells the detailed story of one of the largest Wall Street deals of all time - the leveraged buyout of the RJR Nabisco Corporation. The authors, Bryan Burrough and John Helyar, are former Wall Street Journal reporters. They spent many hours interviewing the players involved, and, in so, have come up with a very thorough (and presumably accurate) description of the events that took place.

Ross Johnson, CEO of RJR Nabisco, decided to take the company private. Officially, his reason was to improve shareholder value, since the RJR Nabisco stock was undervalued (and Johnson's attempts to boost it have failed). His other reasons may have included money and the constant urge to change things up. He teamed up with Shearson Lehman Hutton to make a bid to the board. In their shortsightedness, this "management group" did not expect anyone else to compete - due to the sheer size of the deal. However, Kohlberg Kravis Roberts & Co. made a tender offer, which started off a bidding war between the two groups (and a few third party bidders). This book describes everything in detail - starting with how Johnson got to Nabisco - and finishing off with a gripping climax of Shearson and KKR's final bid war.

It is a long narrative, over 500 pages long. The authors take a lot of side tangents to describe many personal biographies. I found those of major players (like Ross Johnson and Henry Kravis) very interesting, and those of lesser-involved people somewhat excessive. Nevertheless, I was never tempted to skip over paragraphs or pages, as I sometimes am in lengthy books with lots of characters.

The authors clearly have done a lot of research. I liked that they included footnotes when stories from different people didn't match up. I also like the photographs included in the book - they put faces on the people described so thoroughly. The "Players" section in the beginning of the book is also very helpful - it lists the names of almost everyone involved in the deal.

The narrative is great. The story is gripping, with many twists and surprises. We learn about the multiple final bids submitted by KKR and the management group, the backstabbing plots, and the emotions and broken spirits behind the closed doors. It's as if we are there amidst the board meetings - kudos to the authors for their great writing. However, as some reviewers before me mentioned, it would have been nice to see more financial details - and more on what actually transpired after the takeover (the epilogue provides some details, but not nearly enough). Check out John Helyar's article in Fortune (October 13, 2003) - it describes what happened to RJR after the LBO. KKR took 60% of the company public in 1991 and then finally got rid of it in 1995. In the end, KKR had very disappointing returns on its LBO and drove RJR into the ground with poor leadership.

In conclusion, it's a great read for anyone interested in business or history. It works as both a fun thriller and a good historical account of the events that took place. However, I am a bit skeptical of why this book is a recommended read for many MBA curriculums. Other than describing the corporate culture and Wall Street in the late '80s, it doesn't really provide the financial details from which the readers could learn something practical.

Pros:
+ great narrative - gripping story with twists
+ many details on personal lives of the people involved
+ fantastic insight into the corporate world of the '80s

Cons:
- not enough financial details to learn from
- for some readers, can feel lengthy with lots of tangents
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10 of 11 people found the following review helpful
on April 14, 2002
This book is a description of the largest leveraged-buy out of the 80's. The book covers the management buy out of RJR and all the financial moves that took place to get it done. It covers the winners and losers and the tactics they used. The authors are investigative reports so they have the ability to provide the reader with a very well constructed and easy to understand story. They really bring the reader into the negotiations and all the high pressure and tension is coved to the reader. The most fun was when the authors took to describing all the financial players involved, their egos and ways of life and doing business. The excesses of some of the companies detailed are really something.
If you are interested in this topic then I would suggest you also read "Den of Thieves" and "Predator's Ball", both of which cover the 80's M&A and Junk Bond world. To get a better understanding of KKR, I would suggest "Masters of Debit" and if you are looking for more info on this particular deal I would suggest "True Greed".
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15 of 18 people found the following review helpful
on May 21, 2000
I read this book several years ago after watching the movie based on the book. At that time, it was a hard book to find (This was before Amazon)but well worth the search. This book is rather complicated and at times the numerous characters are hard to keep separate. Actually, if you read it twice it is much easlier to follow.

The book presents a detailed narrative of the takeover fight between Ross Johnson, CEO of RJR Nabisco, and KKR, the firm that perfected LBO's. The reasons, stupid mistakes and misconceptions made by the combatants make the story interesting.

A casual reader might watch the movie before reading this book to acquaint themselves with the storyline and characters. However, you should be forewarned that James Garner portayal of Ross Johnson paints a picture of a likeable person fighting the demons of Wall Street. The real Ross Johnson is more closely aligned with the demons.

The book does leave the reader wanting to know what happened to Ross Johnson. It appears that Johnson basically retired from the business world. There is little information about him except one small reference to a business venture that failed. He did divorce Lauri sometime in the 1990s. Kravis also was divorced from his wife in the book.

Burrough and Helyar wrote an article in the Wall Street Journal that attempted to tie up loose ends about the major characters and the eventual sale of RJ Reynolds by KKR. The surprising item in the article was the deal was the top of the mountain for KKR. After the completion of the deal, KKR started a slow downard slide because of infighting among partners, Kravis and his cousin had many partners, and other factors including the financial weight of the RJ Reynolds deal.
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6 of 6 people found the following review helpful
on April 27, 2000
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.
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11 of 13 people found the following review helpful
on February 11, 1997
Why read fiction when all that you have to do is open the Wall St. Journal? Barbarians at the Gate gives the reader insight into the behind the scenes details that go into a major corporate transaction. Laymen, don't be swayed!!! This work of non-fiction reads like a Grisham or Turow novel. Deals are cut, backs are stabbed, and a lot a money changes hands. Just another day at the office for players in this arena.
Having become a mergers & acquisitions advisor subsequent to reading this book, I have come to realize how true to life it actually is. Heylar and Burroughs do an excellent job of explaining the complexities of a buyout without inundating the reader with boring (trust me...boring) details. This book is a must read for people interested in a good story, as well as people interested in life on the Street.
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