Library:Barbarians at the Gate
| Barbarians at the Gate: The Fall of RJR Nabisco | |
|---|---|
| Author | Bryan Burrough and John Helyar |
| First published | 1990 |
| ISBN | 978-0-06-016172-9 unverified |
| Role | Analysis |
| Domains | Business, Finance & Scams |
| Tactics | Propaganda Technique Statistical & Evidentiary Distortion |
Barbarians at the Gate: The Fall of RJR Nabisco is a 1990 book by Bryan Burrough and John Helyar.
Summary
Bryan Burrough and John Helyar, reporters for The Wall Street Journal, wrote this account of the 1988 battle for control of RJR Nabisco, the tobacco and food conglomerate behind Winston cigarettes and Oreo cookies. The contest, in which the company's own chief executive tried to buy it with borrowed money, ended in what was then the largest leveraged buyout in history, valued at about $25 billion. The book became a bestseller and a 1993 television film, and is a classic account of corporate excess in the 1980s.
The buyout
In October 1988 RJR Nabisco's chief executive, F. Ross Johnson, announced that he and a group of managers, backed by the investment bank Shearson Lehman Hutton, wanted to buy the company in a leveraged buyout, using large amounts of borrowed money secured by the company's own assets. The private equity firm Kohlberg Kravis Roberts (KKR) entered a rival bid. Over the following weeks the two sides and their bankers and lawyers fought a bidding war. KKR eventually won, even though its final bid was not clearly higher, partly because the board doubted the management group's intentions.
Management interests
The book shows the gap between the language of "shareholder value" and the behavior of executives. Johnson's management group had negotiated terms that would have given its members a very large stake in the company. Burrough and Helyar describe Johnson's lavish corporate lifestyle, including a fleet of company jets nicknamed the "RJR Air Force," sports stars on the payroll and luxurious offices, all paid for by shareholders.
Wall Street's role
The authors portray investment bankers and lawyers as earning enormous fees regardless of outcome, encouraging deals that enriched advisers. Junk bonds, high-yield debt popularized by Drexel Burnham Lambert, made such buyouts possible, loading companies with debt that later forced cutbacks and layoffs.
Relevance to Bullshitopedia
Barbarians at the Gate illustrates how executives and advisers can cloak self-interest in the language of efficiency and shareholder value. It encourages readers to ask who really benefits from corporate deals and how much of the justification offered is public relations.
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