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Barbarians at the Gate: The Fall of RJR Nabisco
09-05-2018, 08:39 PM,
Post: #1
Barbarians at the Gate: The Fall of RJR Nabisco
I found this title while reading the news and decided to see if it can be found somewhere on the internet. Turns out, if you google the title you can find a copy of the pdf. I finished the book after 5 days. It's a real page turner. And it does not require much knowledge of finance to enjoy.

The book chronicles the events leading to the largest leveraged buyout then, in the late 1980s. This is wall street drama, whose plot is not too different from the likes of Game of Thrones. It details the history of Nabisco (Oreo and Ritz) and RJ Reynolds (Winston Salem and Camel cigarettes), and Kholberg Kravis Roberts (private equity).

It also shows how investment banking services grew from increased buyout activities, how these investment bankers value companies, the tiresome auction process, the excesses of top executives, and the importance of pleasing your board members. 

It seemed to me that Ross Johnson -- the management-led group competing with 'hostile' KKR -- would have won the bid if he hadn't incurred the board's ire. Twice the board thwarted Johnson's bid.

As it were, the 'winner' of the auction didn't really make big returns on the prized assets:

https://www.nytimes.com/2004/07/09/busin...apter.html

http://archive.fortune.com/magazines/for.../index.htm

For retail investors, the lesson is that you can always walk away if the deal doesn't look good to you. Just because you are interested in something doesn't mean you'll have to buy it, or engage yourself in a bidding war, especially if the price doesn't make sense. There'll always be other opportunities coming along...

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