Partially to rise to Midas’ challenge/threat not to recommend any more books until we monkeys step up and start doing the same, I offer my review of this classic, which I have just recently finished.
This is a book that has been on many a “Wall Street recommended reading list,” and for good reason. The RJR/Nabisco buyout stood as the single largest leveraged buyout in American corporate history for 17 years, unmatched until the private equity mega-boom of the early-mid 2000s. The circuslike glee with which the media of the time reported it would have made the Bronx Zoo 1977-78 Yankees jealous.
Even though a lot of us monkeys probably weren’t even born yet when it happened, “Barbarians at the Gate” still contains many of the elements that characterize any era of excess, greed, and ego—of which this real-life story had plenty. Every single major investment house was involved to some degree to get a piece of the action: KKR, Shearson Lehman, Morgan Stanley, Drexel Burnham, Merrill Lynch, First Boston, Goldman Sachs, Forstmann Little, Salomon Brothers, and many more—an all-star cast if there ever was one.
The nearly 600-page book is thoroughly researched and has updated interviews with the major players who are still around. In an almost comically frosty manner, the Kravis of 2008 reiterates KKR’s difficulties in the aftermath of the deal, and we’re left with the impression that he probably wishes he had never done the deal in the first place.
A particularly fascinating aspect to me was that when the $31 billion deal (including just over $26 billion in cash) went through, the entire U.S. financial system was put on hold as the Fed had to wire the cash through in $1 billion increments, prevented by law from wiring anything more than that. For one deal! Unbelievable.
At the time (perhaps some of the older guys who were around then would like to weigh in?), this was the moral panic of the day. RJR/Nabisco CEO had a golden parachute of $53 million, which seems paltry in today’s numbers but pissed off a lot of people then. The $75 million fee KKR pocketed wasn’t a bad piece of change either.
The book does take a little while to get going, as the authors insist on taking readers through the history of each of the two most important companies in the deal. However, this gives us a picture of the kinds of personalities involved (such as a particularly illuminating story about Kravis and Roberts cleverly forcing Kohlberg out of the firm). The level of detail that the writers go into for the negotiations and valuations is astounding and gives readers insight into how these high-level tactics function. Sadly, having read more about today’s firms and their tactics, not much seems to have changed since then.
A vast, immersive journey that is part documentary, part novel, “Barbarians At the Gate” deserves its many recommendations. Read up, monkeys! You won’t regret it.
Monkey’s Review 1: Barbarians At the Gate
Monkey’s Review 2: The Financier
Monkey’s Review 3: Decision Points
Monkey’s Review 4: Debunkery
Monkey’s Review 5: When Genius Failed
Monkey’s Review 6: Monkey Business
Monkey’s Review 7: Death Of The Banker
Monkey’s Review 8: A Journey
Monkey’s Review 9: Damn It Feels Good To Be A Banker
Monkey’s Review 10: The Quants
Monkey’s Review 11: All About Hedge Funds
Monkey’s Review 12: The Unlikely Disciple
Monkey’s Review 13: Adventure Capitalist
Monkey’s Review 14: The Hedge Fund Book
Monkey’s Review 15: Investing In Hedge Fund of Funds
Monkey’s Review 16: Hilarity Ensues
Monkey’s Review 17: The Prince
Monkey’s Review 18: Markets Never Forget (But People Do)
Monkey’s Review 19: The Money Culture
Mod Note: Best of WSO, this was originally posted May 2011.
Read it last year, awesome story. Little slow to start out but picks up when the deal gets going. Enjoy!
I've been meaning to get this book for a while now but my backlog is so huge that it will take some time before this book makes it on top.
Another book that I would recommend simply for pleasure reading is "The Wolf of Wall Street". Very enjoyable read and goes in depth about greed and how Jordan Belfort went from a guy who was worth around $100MM to zero to jail.
Good work.
I read this one 6 months ago and loved it. My favorite aspect of it was the portrayal of the strong personality of Ross Johnson, his friends, and how he played everyone to his advantage while living it up at 30,000 feet on his fleet of coporate jets and acting like a Canadian hill-billy. I think he deserved all the money and fame for his hard work of the merging of standard brands with nabisco, and then to RJR. Sure he was helped by an era where leverage buyouts were just starting to apply to large companies, but I think he deserves a lot of credit for doing what was right for the shareholders - himself included.
From an outsiders perspective, I also was amused that the investment bankers at all of the competing firms came up with drastically different valuations of RJRNabisco. Guess it isn't an exact science after all.
Well said!
True! I liked where Johnson told one of his coworkers, "He's going to like my sex counselor--when I want his fucking advice, I'll ask for it."
Finished it about two weeks ago. I also agree with the slow start.
Guys trying to capture glory and fame for completing the largest deal, regain former glory, grudge, revenge, jealousy, etc. The amount of people involved in the epic battle for RJR Nabisco made the story even better.
I'm in the middle of the book right now, just where Shearson and Salomon announce their own $92 bid after the frustrating negotiations with Kravis. Damn this shit has me on the edge of my seat. Besides the hardback that I got in the house, I got an e-book on my IPhone to read while in traffic and a PDF version to read at work when I ain't got shit to do - This book is flat out awesome. Any present/ aspiring monkeys who ain't read it are missing out big time.
I think the most amazing part of the book is when KKR gets paid like 40M to extend their offer for another hour. I am assuming it is true considering how well researched this book is, but it is still hard to believe.
Agreed.. I'm not huge into the whole Banking/PE thing, but that book is fantastic.
Read this book a couple of years ago. It was hard to put down. While I don't remember every nitty-gritty, what I do remember is how the book masterfully covers the larger than life personalities of Johnson & Kravis, the investment bankers and countless employees who became tobacco millionaires and were paid handsome dividends for their shares, the shady accounting practices that the tobacco industry of the era used to push revenues and their legal battles with the regulators.
When the fuck does the history part end
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