Word: buyouts
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Dates: during 1980-1989
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...never seen anything quite like the battle for RJR Nabisco. The combatants are brandishing tens of billions of dollars and mobilizing squadrons of bankers and lawyers on a scale previously unimagined. On one side is the firm of Kohlberg, Kravis, Roberts, until now the undisputed master of the leveraged buyout. On the other is an alliance between a group of RJR Nabisco executives and Shearson Lehman Hutton, an old-line investment firm determined to break KKR's dominance of the hottest, most lucrative business on Wall Street. If either side pulls off the deal, the course of U.S. corporate history...
...contest has already pushed the price for RJR Nabisco above $20 billion, which means that the potential buyout would dwarf the largest previous takeover, the $13.3 billion acquisition of Gulf by Chevron in 1984. The megastakes battle has taken the starch out of corporate chiefs everywhere. After all, if RJR Nabisco, the 19th largest U.S. corporation (1987 revenues: $16 billion), can be taken over by the new breed of dealmakers, is any company safe? Is Du Pont doable? Can General Electric be hot-wired? Worse, must every chief executive view a healthy balance sheet as his worst enemy, a potentially...
...time leveraged buyout is one of the cleverest financial gimmicks of all time. An investor group, which often includes some of the target company's top managers, borrows billions to take the firm private by buying its stock from the shareholders. The company's own assets are used as security for the financing. After the deal is completed, the new owners usually try to bring their debt down to a manageable level -- and pick up enormous profits along the way -- by selling off parts of the company piecemeal. In the case of RJR Nabisco, the total market value of popular...
...Buyouts have become so attractive that they are sweeping through corporate boardrooms like no other business fad in memory. In the first ten months of 1988, according to IDD Information Services, a Manhattan research firm, 143 companies were taken private in buyouts worth $91 billion, in contrast to 105 deals worth $36 billion during the same period of 1987. These transactions are enriching shareholders and buyout specialists, but the takeovers could be causing grave damage to U.S. industry. Never before has debt been substituted for shareholders' equity on such a huge scale. No one knows how these highly leveraged companies...
...buyout binge is causing concern among U.S. financial regulators. Responding in writing to questions from the Senate Banking Committee last week, Federal Reserve chairman Alan Greenspan said the Fed had cautioned banks about extending loans for leveraged buyouts. He suggested that Congress take a closer look at tax provisions that encourage such buyouts. Greenspan's views sent a tremor through the stock market, and share prices of companies involved in takeovers took a tumble, as many investors turned fearful that the buyout boom could suddenly go bust...