Chapter 1: The Bake-off
F. Ross Johnson, CEO of RJR Nabisco, is dissatisfied with the company's stagnant stock price. He assembles a team to explore a leveraged buyout (LBO) to boost the stock. Johnson is shown as a charismatic but flawed leader, interested in the perks and glamour that come with his position.Chapter 2: A Brief History of RJR Nabisco
This chapter gives readers a background of how R.J. Reynolds (tobacco company) and Nabisco (food company) merged to become a diversified conglomerate. The history sets the stage for understanding the complexities of the later LBO.Chapter 3: The Colossus
Henry Kravis, a major player in LBOs from Kohlberg Kravis Roberts & Co. (KKR), hears about Johnson’s interest in an LBO. Intrigued by the opportunity to make the biggest buyout in history, he is determined to be a part of it.Chapter 4: Ross's LBO
Johnson and his team start seriously considering how to execute an LBO. Their initial price point angers some board members, including Kravis, who think the price is too low and would undervalue the company.Chapter 5: The Forstmann Gambit
Ted Forstmann, another potential buyer, brings a different perspective. He questions the ethics and financial soundness of the leveraged buyout, providing a counter-narrative to the growing LBO frenzy.Chapter 6: KKR Strikes
Kravis, not willing to be sidelined, puts forth an unsolicited buyout offer. This triggers a formal auction for RJR Nabisco and ignites a bidding war between KKR and Johnson's team.Chapter 7: PR Wars
Both KKR and Johnson wage a public relations battle through the media. Johnson is criticized for his extravagant lifestyle, while KKR tries to position itself as the more responsible buyer.Chapter 8: The Leverage Miracle
This chapter dives deep into how LBOs are financed. The teams court banks and financial institutions to back their bids. High levels of debt are being considered, which adds significant risk to the deal.Chapter 9: Boardroom Maneuvers
The board of RJR Nabisco is torn between Johnson's and Kravis's offers. Johnson is accused of a conflict of interest, as he stands to personally profit in a major way if his own bid wins.Chapter 10: Due Diligence
Both bidding teams go through the company's financials to justify their final offers. This due diligence reveals the state of the company's units, both profitable and unprofitable.Chapter 11: Final Bids
The final bids come in at astronomical values. Kravis and Johnson both pull out all the stops to try and win, pushing the financial envelope to its limits.Chapter 12: The Lockup
KKR employs strategies to "lock in" financing and support for their bid. Johnson's team, on the other hand, is starting to see their bid unravel due to scrutiny and questions about its viability.Chapter 13: Boardroom Showdown
After tumultuous discussions, the RJR Nabisco board chooses KKR's offer as the winning bid. Johnson, despite his aggressive tactics, fails to acquire the company.Chapter 14: Aftermath
The deal has severe ramifications for all parties involved. Johnson leaves the corporate world, KKR struggles with the immense debt, and many employees face uncertainty. The deal serves as a cautionary tale of corporate excess.Learning Point
The tale serves as a study of corporate greed, ambition, and the pitfalls of financial engineering. It paints a picture of an era in American business history where excess was celebrated, leading to complicated financial maneuvers that put entire companies at risk. The book warns of the dangers of pursuing wealth and business objectives at the expense of ethical considerations and long-term stability.The dramatic narrative and colorful characters offer insights into human behavior within the corporate world, illustrating both the genius and folly involved in such high-stakes financial gambits.
※ Important: The content of this post is mostly taken from ChatGPT, and it had been arranged in a nice format by me. You should be fact checking these given points/examples in this post should you be using them for grading purposes. Thank you.
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