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Merchants of Debt: KKR and the Mortgaging of American Business

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For more than a decade, Henry Kravis and George Roberts have been archetypes, first of Wall Street's boom years and then of its excesses. Their story and that of their firm--the biggest, most successful, and most controversial participant in the age of leverage--illuminates an entire era of financial maneuvering and speculative mania. Kravis and Roberts wrote their way int For more than a decade, Henry Kravis and George Roberts have been archetypes, first of Wall Street's boom years and then of its excesses. Their story and that of their firm--the biggest, most successful, and most controversial participant in the age of leverage--illuminates an entire era of financial maneuvering and speculative mania. Kravis and Roberts wrote their way into the history books by concocting one giant takeover after another. Their technique: the leveraged buyout, an audacious way to acquire a company with borrowed money, borrowed management--and a lot of nerve. Their firm, Kohlberg Kravis Roberts & Co., dominated the Wall Street scene in the late 1980s, acquiring one Fortune 500 company after another, including Safeway, Duracell, Motel 6, and RJR Nabisco. Merchants of Debt draws on more than 200 interviews, including recurring access to the central figures and their KKR associates, as well as court documents and private correspondence to couch giant financial issues in human terms. The story of KKR shows how pride, jealousy, fear, and ambition fueled Wall Street's debt mania--with consequences that affected hundreds of thousands of people. Anders addresses three questions: Why did American business become so enchanted by debt in the 1980s? How exactly did Kravis and Roberts rise to the top of the heap? What have buyouts, especially KKR's deals, done to America's economic strength? Here is a gripping saga that takes readers behind closed boardroom doors to show how star-struck young bankers, ruthless deal-makers, and nervous CEOs changed one another's lives--and the whole American economy--over a fifteen-year span.


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For more than a decade, Henry Kravis and George Roberts have been archetypes, first of Wall Street's boom years and then of its excesses. Their story and that of their firm--the biggest, most successful, and most controversial participant in the age of leverage--illuminates an entire era of financial maneuvering and speculative mania. Kravis and Roberts wrote their way int For more than a decade, Henry Kravis and George Roberts have been archetypes, first of Wall Street's boom years and then of its excesses. Their story and that of their firm--the biggest, most successful, and most controversial participant in the age of leverage--illuminates an entire era of financial maneuvering and speculative mania. Kravis and Roberts wrote their way into the history books by concocting one giant takeover after another. Their technique: the leveraged buyout, an audacious way to acquire a company with borrowed money, borrowed management--and a lot of nerve. Their firm, Kohlberg Kravis Roberts & Co., dominated the Wall Street scene in the late 1980s, acquiring one Fortune 500 company after another, including Safeway, Duracell, Motel 6, and RJR Nabisco. Merchants of Debt draws on more than 200 interviews, including recurring access to the central figures and their KKR associates, as well as court documents and private correspondence to couch giant financial issues in human terms. The story of KKR shows how pride, jealousy, fear, and ambition fueled Wall Street's debt mania--with consequences that affected hundreds of thousands of people. Anders addresses three questions: Why did American business become so enchanted by debt in the 1980s? How exactly did Kravis and Roberts rise to the top of the heap? What have buyouts, especially KKR's deals, done to America's economic strength? Here is a gripping saga that takes readers behind closed boardroom doors to show how star-struck young bankers, ruthless deal-makers, and nervous CEOs changed one another's lives--and the whole American economy--over a fifteen-year span.

30 review for Merchants of Debt: KKR and the Mortgaging of American Business

  1. 4 out of 5

    Ed

    I first read this book when it was published in the early '90s, shortly after I had been fired from my job as a junkbond salesman. Back then, even though I had spent 5 years in the trenches, I had very little perspective on Wall Street, especially the history of LBO lending. Reading Anders' account of the leveraging-up cycle of the '80s hit me with the force of something like a revelation. The scales fell from my eyes — and I came to see my previous career in a completely different light. Coinci I first read this book when it was published in the early '90s, shortly after I had been fired from my job as a junkbond salesman. Back then, even though I had spent 5 years in the trenches, I had very little perspective on Wall Street, especially the history of LBO lending. Reading Anders' account of the leveraging-up cycle of the '80s hit me with the force of something like a revelation. The scales fell from my eyes — and I came to see my previous career in a completely different light. Coincidentally, as a teenager I had often caddied for Don Kelly, an important figure in Anders' story. Years later, as a young bondsalesman in the '80s, I made a living hawking the junkbonds created by Kelly & KKR's dealmaking. The Beatrice LBO imho was the highwater mark of the era, followed shortly thereafter by much worse deals, like RJR. What I love about this book is its recitation of details, events & conversations which taken together reveal something of the intellectual currents of that era, the cosmos of ideas seemingly born in the late '70s that would underwrite years, even decades, of leveraging-up that is only now (possibly) slowly petering out. Having recently reread this book — and several of its referenced sources — I want to say that this book is still great, still timely, relevant & informative. I regret that George Anders hasn't published or said much about private-equity investing in recent years, which I think a great shame given his expertise and the recent discussions about PE occasioned by Mitt Romney's campaign. Hopefully Anders will someday publish an entirely new book on this subject, picking up where this one ends. I'd love to read a long, updated addendum.

  2. 5 out of 5

    Eric

    An engrossing and thorough history of KKR and the LBO craze of the 1980s. However, it suffers by comparrison to Barbarians at the Gate, an account of the firm's most famous buyout (RJR Nabisco), which delves at some depth into KKR's origins. If you have read Barbarians--if not, you should--Merchants of Debt is relatively duplicative. As the publication date suggests, you should look elsewhere (I suggest Kings of Capital) for a depiction of how 1980s buyout firms evolved into the private equity i An engrossing and thorough history of KKR and the LBO craze of the 1980s. However, it suffers by comparrison to Barbarians at the Gate, an account of the firm's most famous buyout (RJR Nabisco), which delves at some depth into KKR's origins. If you have read Barbarians--if not, you should--Merchants of Debt is relatively duplicative. As the publication date suggests, you should look elsewhere (I suggest Kings of Capital) for a depiction of how 1980s buyout firms evolved into the private equity industry.

  3. 4 out of 5

    Lobstergirl

    An excellently written if occasionally dry account of Kohlberg Kravis Roberts' reign over the leveraged buyout era on Wall Street. Some of the social costs of LBOs are detailed, although not quite as thoroughly as I might've liked. When LBOs were successful, they worked out spectacularly well for the dealmakers (KKR, Wall Street lawyers and bankers, commercial bankers), the target companies' senior executives, and shareholders, not as well for rank and file employees of the purchased companies, An excellently written if occasionally dry account of Kohlberg Kravis Roberts' reign over the leveraged buyout era on Wall Street. Some of the social costs of LBOs are detailed, although not quite as thoroughly as I might've liked. When LBOs were successful, they worked out spectacularly well for the dealmakers (KKR, Wall Street lawyers and bankers, commercial bankers), the target companies' senior executives, and shareholders, not as well for rank and file employees of the purchased companies, who were often laid off by the hundreds or thousands as management shut plants, factories, and stores to boost profits and pay down debt. Anders, writing in 1992, ends on an overly optimistic note: "... it is unlikely that any credit cycle for decades will be as drastic as the swing from the giddiness of 1987 to the panic of 1990. Chastened lenders can be counted on to avoid a precise repeat of the follies of the 1980s for a long time."

  4. 4 out of 5

    Ankit Agrawal

    A highly engaging story and the most definitive history of the private equity and LBO powerhouse KKR from its origins in 1976 to the peak of its power in the mid to late '80s and eventual transformation to a steadier, more conventional entity circa 1992. The book is not only the story of KKR but also in a large part that of the LBO industry's origins. The narrative prowess doesn't quite match that of Barbarians at the Gate (which incidentally is the story of the most expensive and marquee deal K A highly engaging story and the most definitive history of the private equity and LBO powerhouse KKR from its origins in 1976 to the peak of its power in the mid to late '80s and eventual transformation to a steadier, more conventional entity circa 1992. The book is not only the story of KKR but also in a large part that of the LBO industry's origins. The narrative prowess doesn't quite match that of Barbarians at the Gate (which incidentally is the story of the most expensive and marquee deal KKR has done) but is nevertheless good enough. While Barbarians... kind of wraps up the post-deal story in a hurry in a few pages, Merchants of Debt dwells at length on what it took KKR to rescue the deal and the firm itself. The principal characters i.e. the partners of KKR are etched out in sufficient detail. KKR's success, however, was a result not just of the skills and enterprise of its partners but also fortuitous circumstances such as favorable laws, a favourable judicial system, a pro-free-market government and hence benign regulators. Once the optics turned ugly, the public opinion shifted for the worse and the loopholes in tax rules and other laws closed fairly quickly to make business-as-usual untenable. KKR recognized this and adapted to the times by reorienting its business model. The epilogue gives some details on KKR's business today and the various other areas apart from buyouts that it has expanded to by way of keeping the book updated. The appendix gives basic details of all the 40-odd buyouts that KKR did from 1976-1992. Overall, Merchants of Debt is a balanced and neutral account of its subjects. It doesn't gloss over inconvenient facts and presents views from both sides of the divide- the Wall Street as well as the politicians and the public. It is non-judgemental, choosing to let facts and research speak for themselves. Merchants of Debt is a historical narrative, not a technical book so one wouldn't be any wiser about the mechanics of individual deals upon reading of this book. One has to turn to "The New Financial Capitalists" for that, which I intend to shortly. This latter started out being written as an institutional record of KKR's business on the instructions of George Roberts (the "R" in KKR) but was turned into a project to be published for the general public. It draws upon detailed KKR records and focuses on the technical.

  5. 4 out of 5

    Rahul Sengupta

    I read this book after reading Barbarians at the Gate a few months back . I read this book to get a broader understanding of private equity in the "Age of Leverage." The book did well to chronicle all of the events that brought KKR to success and how they withstood some of the tremendous challenges along the way (from the junk bond market crash to the transition to equity finance). However, I thought the book spent too much time scratching the surface of many deals, especially when it came to ho I read this book after reading Barbarians at the Gate a few months back . I read this book to get a broader understanding of private equity in the "Age of Leverage." The book did well to chronicle all of the events that brought KKR to success and how they withstood some of the tremendous challenges along the way (from the junk bond market crash to the transition to equity finance). However, I thought the book spent too much time scratching the surface of many deals, especially when it came to how the firm raised money. I would have been even more interested to go in depth on how KKR would restructure their portfolio companies to achieve their astronomically high rates of return for their investors (beyond selling off weak divisions, lowering wages, or "improving efficiencies"). Overall, solid read. Would recommend.

  6. 4 out of 5

    Michael L. Neary

    Excellent book for laymen The book was informative as to the story. As an industry professional, I would have preferred a more technical approach, but a good entertaining read.

  7. 4 out of 5

    Amar Dalal

    Amazing insights in the growth of KKR partners in early years and the LBO market that prevailed during 1980s in Wall Street. Also liked the fact that Henry Kravis asking young students to go for science and arts degrees as most of the invention and easy stuff in the world of finance was already done.

  8. 4 out of 5

    Karen

    Interesting reading on near-callous use of debt in the 1980s, especially in light of the current economic melt-down of 2007 & 2008, i.e, Bear, Stearns and CIT, just to name the ones collapsing in the past 7 days.

  9. 5 out of 5

    Sean Doyle

    Generally entertaining but sometimes a bit slow. Would recommend it to people interested in finance.

  10. 5 out of 5

    Mun Shieh

  11. 4 out of 5

    Danny O'Donoghue

  12. 5 out of 5

    Antonio Junqueira

  13. 4 out of 5

    Ankit Wadhwa

  14. 4 out of 5

    Andres Medina

  15. 5 out of 5

    Scott Sillers

  16. 4 out of 5

    Eejuin Ng

  17. 4 out of 5

    Mukesh Tiwari

  18. 5 out of 5

    juan camilo

  19. 5 out of 5

    Pablo Perez III

  20. 4 out of 5

    Filip Popovic

  21. 4 out of 5

    Arthur

  22. 5 out of 5

    Cris Radu

  23. 5 out of 5

    Dion Persson

  24. 4 out of 5

    Brett E Moore

  25. 5 out of 5

    Patrick

  26. 5 out of 5

    Christopher

  27. 5 out of 5

    Bav

  28. 4 out of 5

    Varshik Nimmagadda

  29. 4 out of 5

    Ian

  30. 5 out of 5

    Alex K.

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