Barbarians at the Gate: The Fall of RJR Nabisco

Barbarians at the Gate: The Fall of RJR Nabisco

by Bryan Burrough, John Helyar
Barbarians at the Gate: The Fall of RJR Nabisco

Barbarians at the Gate: The Fall of RJR Nabisco

by Bryan Burrough, John Helyar

Paperback(20th Anniversary Edition)

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Overview

#1 New York Times bestseller and arguably the best business narrative ever written, Barbarians at the Gate is the classic account of the fall of RJR Nabisco at the hands of a buyout from investment firm KKR.

A book that stormed both the bestseller list and the public imagination, a book that created a genre of its own, and a book that gets at the heart of Wall Street and the '80s culture it helped define, Barbarians at the Gate is a modern classic—a masterpiece of investigatory journalism and a rollicking book of corporate derring-do and financial swordsmanship.

The fight to control RJR Nabisco during October and November of 1988 was more than just the largest takeover in Wall Street history. Marked by brazen displays of ego not seen in American business for decades, it became the high point of a new gilded age and its repercussions are still being felt. The tale remains the ultimate story of greed and glory—a story and a cast of characters that determined the course of global business and redefined how deals would be done and fortunes made in the decades to come.

Barbarians at the Gate is the gripping account of these two frenzied months, of deal makers and publicity flaks, of an old-line industrial powerhouse (home of such familiar products a Oreos and Camels) that became the victim of the ruthless and rapacious style of finance in the 1980s. As reporters for The Wall Street Journal, Burrough and Helyar had extensive access to all the characters in this drama. They take the reader behind the scenes at strategy meetings and society dinners, into boardrooms and bedrooms, providing an unprecedentedly detailed look at how financial operations at the highest levels are conducted but also a richly textured social history of wealth at the twilight of the Reagan era.

At the center of the huge power struggle is RJR Nabisco's president, the high-living Ross Johnson. It's his secret plan to buy out the company that sets the frenzy in motion, attracting the country's leading takeover players: Henry Kravis, the legendary leveraged-buyout king of investment firm KKR, whose entry into the fray sets off an acquisitive commotion; Peter Cohen, CEO of Shearson Lehman Hutton and Johnson's partner, who needs a victory to propel his company to an unchallenged leadership in the lucrative mergers and acquisitions field; the fiercely independent Ted Forstmann, motivated as much by honor as by his rage at the corruption he sees taking over the business he cherishes; Jim Maher and his ragtag team, struggling to regain credibility for the decimated ranks at First Boston; and an army of desperate bankers, lawyers, and accountants, all drawn inexorably to the greatest prize of their careers—and one of the greatest prizes in the history of American business.

Written with the bravado of a novel and researched with the diligence of a sweeping cultural history, Barbarians at the Gate is present at the front line of every battle of the campaign. Here is the unforgettable story of that takeover in all its brutality. In a new afterword specially commissioned for the story's 20th anniversary, Burrough and Helyar return to visit the heroes and villains of this epic story, tracing the fallout of the deal, charting the subsequent success and failure of those involved, and addressing the incredible impact this story—and the book itself—made on the world.


Product Details

ISBN-13: 9780061655555
Publisher: HarperCollins
Publication date: 12/01/2009
Edition description: 20th Anniversary Edition
Pages: 563
Sales rank: 59,057
Product dimensions: 5.20(w) x 7.80(h) x 1.60(d)

About the Author

About The Author
Bryan Burrough is a special correspondent at Vanity Fair and the author of five books.


John Helyar is a columnist for Bloomberg News. He previously wrote for the Wall Street Journal, Fortune, and ESPN, and is the author of Lords of the Realm: The Real History of Baseball.

Read an Excerpt

Barbarians at the Gate
The Fall of RJR Nabisco

Chapter One

Ross's philosophy is, "We're going to have a party, a very sophisticated, complicated party."
-- 0.C. Adams, consulting psychologist to RJR Nabisco

Ross Johnson was being followed. A detective, he guessed, no doubt hired by that old skinflint Henry Weigl. Every day, through the streets of Manhattan, no matter where Johnson went, his shadow stayed with him. Finally he had had enough. Johnson had friends, lots of them, and one in particular who must have had contacts in the goon business. He had this annoying problem, Johnson explained to his friend. He'd like to get rid of a tail. No problem, said the friend. Sure enough, within days the detective vanished. Whatever the fellow was doing now, Johnson's friend assured him, he was probably walking a little funny.

It was the spring of 1976, and at a second-tier food company named Standard Brands, things were getting ugly. Weigl, its crusty old chairman, was out to purge his number two, Johnson, the shaggy-haired young Canadian who pranced about Manhattan with glamorous friends such as Frank Gifford and "Dandy" Don Meredith. Weigl sicced a team of auditors on Johnson's notoriously bloated expense accounts and collected tales of his former protégé's extramarital affairs.

Johnson's hard-drinking band of young renegades began plotting a counterattack, lobbying directors and documenting all the underlying rot in the company's businesses. Rumors of an imminent coup began sweeping the company's Madison Avenue headquarters.

Then tensions exploded into the open: A shouting match erupted between Johnson and Weigl, a popular executive dropped dead, a board of directors was rent asunder. Everything came to a head at a mid-May board meeting. Weigl went in first, ready to bare his case against Johnson. Johnson followed, his own trap ready to spring.

As the hours wore on, Johnson's aides, "the Merry Men," wandered through Central Park, waiting for the victor to emerge. Things were bound to get bloody in there. But when it came to corporate politics, no one was ready to count out Ross Johnson. He seemed to have a knack for survival.

Until the fall of 1988 Ross Johnson's life was a series of corporate adventures, in which he would not only gain power for himself but wage war on an old business order.

Under that old order, big business was a slow and steady entity. The Fortune 500 was managed by "company men": junior executives who worked their way up the ladder and gave one company their all and senior executives who were corporate stewards, preserving and cautiously enhancing the company.

Johnson was to become the consummate "noncompany man." He shredded traditions, jettisoned divisions, and roiled management. He was one of a whole breed of noncompany men who came to maturity in the 1970S and 1980s: a deal-driven, yield-driven nomadic lot. They said their mission was to serve company investors, not company tradition. They also tended to handsomely serve themselves.

But of all the noncompany men, Johnson cut the highest profile. He did the biggest deals, had the biggest mouth, and enjoyed the biggest perks. He would come to be the very symbol of the business world's "Roaring Eighties." And he would climax the decade by launching the deal of the century -- scattering one of America's largest, most venerable companies to the winds.

The man who would come to represent the new age of business was born in 1931 at the depth of an old one. Frederick Ross Johnson was raised in Depression-era Winnipeg, the only child of a lower-middle-class home. He was always "Ross," never Fred -- Fred was his father's name. The senior Johnson was a hardware salesman by vocation, a woodworker by avocation, and a man of few words. Johnson's petite mother, Caroline, was the pepper pot of the household -- a bookkeeper at a time when few married women worked, a crack bridge player in her free time. Young Ross owed an early knack for numbers and the gift of gab to her; an early entrepreneurial bent be owed to the times. The Johnsons weren't poverty-stricken, but neither did they own their own bungalow until Johnson was eight years old.

Around that period young Ross began working at a variety of afterschool jobs. He used the money he earned for serious things, like buying clothes. He started with standard kid tasks, such as delivering magazines around the neighborhood and selling candy at the circus, then branched into more innovative ventures, such as renting out comic books from his collection. When he grew older, he sold certificates for baby pictures door-to-door. It was an enterprise he would turn to whenever he needed a buck during his years in college.

Johnson wasn't the best student in his high school, ceding that honor to his friend Neil Wood, who would go on to head the huge Cadillac Fairview real estate firm. Johnson was the kind of teenager who could rank in the upper quarter of his class, as he did, without appearing to try very hard, which be didn't. Nor was he the best athlete in school, although he was a rangy six feet three inches by the time he graduated. He was far better at memorizing baseball statistics in The Sporting News than hitting a fastball.

Unlike his father, who hadn't completed high school, Ross Johnson wanted to be a college man, and he took the crosstown bus each day to Winnipeg's University of Manitoba. He was average inside the classroom but excellent out of it: president of his fraternity, varsity basketball, and honors as outstanding cadet in the Canadian version of ROTC. (This despite a propensity for pranks: One night Johnson and some chums ambushed a superior officer, whom they considered a superior jerk, tied him to a diving board, and left him to contemplate his sins as the sun rose.)...

Barbarians at the Gate
The Fall of RJR Nabisco
. Copyright &#copy; by Bryan Burrough. Reprinted by permission of HarperCollins Publishers, Inc. All rights reserved. Available now wherever books are sold.

What People are Saying About This

Ken Auletta

“Impressive qualities... delicious scenes... a cinematic yet extraordinarily careful book.”

Reading Group Guide

Introduction

"In its final decade Reynolds had become less a great company than a great dream machine ... Hoisted onto the auction block, the company became a vast prism through which scores of Wall Streeters beheld their reflected glories."

Over six months on the New York Times bestseller list, Barbarians at the Gate is the definitive account of the largest takeover in Wall Street history. For two months in 1988, Bryan Burrough and John Helyar -- reporters covering the story for the Wall Street Journal -- watched as Wall Street was gripped by a frenzy of activity the likes of which it had never before experienced. From the first move by RJR Nabisco CEO F. Ross Johnson and his management team to attempt a leveraged buyout of the company to opposition from formidable opponents, including Henry Kravis, to the tense final moments of the bidding process, Barbarians at the Gate gives readers the inside story.

Drawing on interviews with every major player involved in the takeover, Burrough and Helyar offer a behind-the-scenes look at the inner workings of Wall Street. This is the story of CEOs and investment bankers, deal makers and publicity flaks, strategists and socialites -- and how they all came together in one pivotal moment. Not only does Barbarians at the Gate provide an unprecedented detailed look at how financial operations at the highest levels are conducted, it also offers a richly textured social history of America during the Roaring Eighties -- "a new gilded age, where winning was celebrated at all costs."

Discussion Questions

  1. Chart Ross Johnson'scareer path, from his first job as an accountant at Canadian General Electric in Montreal to his tenure at T. Eaton under the tutelage of Tony Peskett to his executive positions at Standards Brands, Nabisco, and RJR Nabisco. What were the pivotal decisions that catapulted Johnson beyond a string of middle management jobs to executive-level positions?

  2. In the Prologue, the authors state that Johnson seemed "so open, so trusting, so -- how to describe it? -- yes, naïve. Did he realize the forces he was on the verge of unleashing?" Do you agree with this assessment of Ross Johnson? Did having this statement at the beginning of the book affect your opinion of Johnson as you read Barbarians at the Gate?

  3. Also in the Prologue, the authors recount a conversation in which Steve Goldstone asks Johnson why he is considering an LBO of RJR Nabisco. "You're chief executive officer of one of America's great companies, you don't need any more money. Yet you're about to start a transaction in which you could lose it all. Don't you realize all the pain and suffering you'll cause?" Johnson replies by saying, "I really have no choice." What does Johnson mean that he has "no choice"?

  4. Johnson had a history of shaking up the companies where he worked, his life "a series of corporate adventures, in which he would not only gain power for himself but wage war on an old business order." What were Johnson's motivations for "shaking up" the companies where he worked? Looking at his career history, was it inevitable that he would attempt something as spectacular as a takeover of RJR Nabisco?

  5. Johnson was at first resistant to the idea of a leveraged buyout of RJR Nabisco. "For all his free-spending ways, the fact was Johnson remained a prude about corporate debt, the core of any LBO. Why do you think Johnson changed his mind and decided to pursue the LBO?

  6. Discuss the three offers presented to the board -- that of Shearson and the management team, KKR, and First Boston/Salomon. What was the basis of each of the offers? What were the strengths and weaknesses of each one? Why did the board reject Ted Forstmann's offer and refuse to allow him to take part in the bidding process?

  7. In the final round of bidding, the bids were dead even. The board opted to take KKR's offer "for other reasons." What were those reasons? How much influence did the Time magazine cover story about Ross Johnson have on the board's decision?

  8. To some degree the takeover was less about gaining control of RJR Nabisco and more about the ambitions of the players involved. How did the personal agendas of Ross Johnson, Jim Robinson, Peter Coen, Henry Kravis, Ted Forstmann, and the others come into play? Did these personal agendas get in the way of their making sound business decisions?

  9. "The investment bankers were part croupiers, part alchemists. They conjured up wild schemes, pounded out new and more outlandish computer runs to justify them, then twirled their temptations before executives in a 'devil dance.' That, at any rate, is what Johnson took to calling it. Depending on one's viewpoint, the 'dance' Johnson initiated with RJR will go down as either the high point or the low point of an era." Do you agree with this statement about investment bankers? Do you think the "dance" Johnson initiated has gone down as either the high point or the low point of an era? Looking back, how momentous was the RJR Nabisco takeover in Wall Street history?

  10. "'If Ross Johnson hadn't existed,' said Gene Hoots, RJR's former pension manager, 'it would have been necessary for Wall Street to invent him.' In a sense it had. Johnson was a product of his time, as surely as R. J. Reynolds was of his." Do you agree with this statement? Why or why not? Was Ross Johnson a product of his time, or was he representative of the time?

  11. What parallels do you draw between R. J. Reynolds and Ross Johnson? To what extent did the business culture and environment in the late 1980s make possible the RJR Nabisco takeover?

  12. Barbarians at the Gate was written more than a decade ago. What in the book, if anything, do you find relevant to today's business world? How does Barbarians at the Gate compare to other books you've read about Wall Street?

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