Customer Reviews

The New Financial Capitalists: Kohlberg Kravis Roberts and the Creation of Corporate Value

5 star:		(15)
4 star:		(3)
3 star:		(1)
2 star:		(0)
1 star:		(0)

 

 

If you are looking at what I have written, you must be considering buying this book. So I guess it's good for me to tell you what this book really is and where its strength lies. This book isn't a gossipy account of interesting people; it isn't (only) an account of what KKR did. It's certainly not a moral debate of whether Henry Kravis is a 'Barbarian'. My opinion is that this is a book which seriously attempts to tell us what leverage buyout really is; and the mentioning of KKR, its deals, its organizational strucuture etc, merely (in a sense) serve as illustrative examples. In other words, I think despite the fact that the authors have very meticulous account of things about KKR, they have something else in mind: the 'leverage buyout story' instead of 'the KKR story'. This is the main difference between this book and others belonging to the same topic. So if you are serious about learning something about leverage buyouts, read on.

The choice of topics and the quality of exposition of the book is truly unmatched by practically any business books I have ever read. That's the main reason behind the five stars. The analysis throughout, especially the middle chapters, is not yet, but close to academic. But wait, before destroying the online sales of the book by using the word 'academic', I must add that the usual attachment of being boring is absolutely absent. It is so well-written and you'll learn so much from the book that chapter 2 alone (or chp 3 or 4) is worth more than the price.

Finally, to give you more information, this is not a book of pathbreaking insights. But who cares? Every new business book claims itself to be a revolution: the 'everything you previously know about xxx is wrong' kind of slogan. In an age awashed with the chic of being new, Geroge Baker offers the rare gem of simply 'putting things into the right perspective'. You want to know somthing about buyouts? Here you are, crystal clear exposition, abundant historical background, good examples, careful documentation, serious analysis, and, well, maybe a little bit of gossip afterall.

This is an outstanding academic treatment of the investments made by KKR, all of which were some kind of leveraged buy-out. The authors focus their attention on the transactions themselves, not the way they were viewed by society or on the people that put them together - in this regard the book is a rare gem. It treats the period up to 1990 in some depth, with some very interesting case studies that show pretty good financial detail with outstanding qualitative descriptions of the transactions that were put together. As you walk through the various case studies, you are able to sit alongside with the KKR team and watch as the LBO goes from an unusual financial instrument to a mainstream product that is widely accepted in the marketplace. While growing acceptance of financial products is an established facet of Wall Street, to follow this evolution through the work of a single firm really is quite interesting. The manner in which the complexity, leverage and size of the transactions grow is laid out in plain English, making this a fascinating read.

Only Chapter 5 "KKR as an Institutional Form" focused on the firm itself, and even this treatment was not nearly as obsequious as many other financial books (most notably "Goldman Sachs: the Culture of Success" by Endlich). Mr. Baker and Mr. Smith take a very level-headed approach and document the growth of the firm in a straight-forward manner, although they do inject a good deal of `positivity' to their view, i.e. the revolutionary introduction of Monday Morning Meeting's at KKR in the 1990's (this is commonplace at most banks).

I particularly enjoyed the second chapter "Recasting the Role of Debt" which talks about some of the earlier transactions that KKR did in some depth. The description of their LBO of Houdaille is very much worth reading, if only for the fact that traditional `Old Economy' companies are again garnering such interest. Indeed, that is a very noteworthy aspect of the whole book, KKR focused on established companies with real cash flows. The one transaction which involved real growth financing was a near bust. This is very different than all of the financial maneuvering that has gone on over the past two years, and it is interesting to compare the sustainability of the two efforts (the many years of KKR's existence surely triumphs over venture capital's recent 15 minutes of fame). Chapter 4 on "When Risk Becomes Real" talks about some of the failed KKR transactions, EFB Trucking and Eaton Leonard in some detail. The reaction of KKR to these hiccups is very impressive, and while it is told with the same `positivity' of the authors as mentioned above, the authors still do a good job of telling the story in an objective manner. The efforts of the partners to maintaining KKR's reputation in the marketplace is nothing short of heroic, and while there was a clear financial incentive over the short term it is clear that the longer term reputation of the company also played a clear role in motivating their actions.

It really is rare to get a book as good as this with detailed financial information (even if it is more than 10 years old) and a mostly unbiased view of the Company. Where the authors are biased, it is easy to pick up and interpret. This is very much an academic treatment of the firm, with some detail as to what the rest of the market was doing, but not a whole lot. There are just the right number of graphs, which is very nice. I would think anybody working in finance would enjoy this book, although given the depth in which it describes the transactions, it might not be the most leisurely read. This is an outstanding book.

This revealing book covers a highly charged and controversial period of American investment history. George P. Baker and George David Smith study the emergence of the investment house Kohlberg, Kravis, Roberts (KKR), and follow it during the decade KKR ruled the world of leveraged buyouts. The authors begin with the early days when the partners worked together at Bear Stearns. They track the men as they build their own firm and create their own success. In clear, straightforward language, the book presents KKR's intentions and the economics of leveraged buyouts (LBOs). It discusses KKR's role in structuring and managing the deals. We [...] recommend this book as a must read for anyone interested in LBOs or the history of KKR. Executives at all levels will find the KKR saga interesting and useful.

Very interesting and professionally written with significant technical aspects. Extremely useful to understand LBO's rationale and their key success factors.

Although the text is written in a nearly academic tone which sometimes gets boring it contains the wealth of factual informatiion not available anywhere else. Full of details on deal structuring.

I finished this book a year ago, and have referred to it numerous times since. That speaks volumes about both the authors and the subject matter. Chapter two (Recasting the Role of Debt) is by itself worth the price of admission. You will never again see corporate finance in the same light. The New Financial Capitalists is a wonderful addition to the financial layperson's library.

KKR was the first name I heard while researching the Private Equity marketplace for a college paper. It also became the name heard mostly afterwards and rightfully so. Jerome Kohlberg, Henry Kravis and George Roberts are obviously extremely smart and confident guys, fortunately the book exhibits moments of vulnerability; which is helpful for any financial entrepreneur. The only shortfall is that the book isn't longer. I was excited while reading some of the chapters, keep in mind that this is a finance book not the Lord of the Rings. This book is terrific. Enjoy

I bought this book to learn more about how to acquire and manage highly-leveraged companies. The authors did an excellent job of reporting the successes and failures of KKR, and the details behind them. I learned much that I know will be useful in my acquisitions.

As a Wall Street investment banker, I found this to be an excellent look inside the fascinating world of LBO firms and investment banks. (Note: For an insider's view of the financial world, I would also recommend the "Vault Reports Guide to the Top Investment Banking Firms.")

If you're relatively new to the subject and want a good primer/introduction to LBOs, as well as some background history on the leveraged buyout and on KKR, this is a good read. It's reasonably quick and easy to read without being too dumbed down. I think that, among others, one group that would really benefit from reading this book are college students (or even MBA students) who are interested in eventually working in private equity but who don't currently know much about it.

As a brief summary, this book includes:

1) A discussion of the rationale for leveraged buyouts - from the standpoints of both the economics (to the buyer) and corporate governance (LBOs as one solution to the classic principal-agent problem)

2) A history of KKR and of the leveraged buyout in general. It goes back to the founding of KKR and to very early LBOs.

3) A discussion and brief analysis of a number of real world LBOs - both successful and failed. This is probably the most useful part of the book, as it gives you some feel as to the factors that can lead to a successful (or failed) LBO and helps you learn from some of the mistakes of the past.

I was interested in the subject from the perspective of an equity analyst interested in identifying potential LBO targets. The book, naturally, doesn't provide a framework for identifying LBO targets (nor did I expect it to), but it was a very good introduction/primer on the subject that, when combined with other reading and research, helped me develop my own framework for identifying potential LBO candidates.