Barbarians at the Gate audiobook cover - The Fall of RJR Nabisco

Barbarians at the Gate

The Fall of RJR Nabisco

Bryan Burrough, John Helyar

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Money & InvestmentsEconomics

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Barbarians at the Gate
Origins of LBOs+
The 1980s Boom+
Ross Johnson's Rise+
Rise of KKR+
RJR Nabisco Bidding War+
The Resolution+

Quiz — Test Your Understanding

Question 1 of 8
What was the original purpose of the Leveraged Buyout (LBO) when it was first devised in the late 1960s?
  • A. To allow corporate raiders to aggressively dismantle failing companies.
  • B. To help wealthy business owners avoid massive estate taxes and pass wealth to heirs.
  • C. To encourage companies to operate at a profit rather than going into debt.
  • D. To create a new, high-yield market for speculative junk bonds.
Question 2 of 8
Which two factors primarily fueled the massive surge and profitability of LBOs during the 1980s?
  • A. Government subsidies for corporate mergers and reduced income tax rates.
  • B. The decline of labor unions and the deregulation of the banking sector.
  • C. The tax deductibility of interest payments and the rise of high-risk junk bonds.
  • D. The invention of electronic trading and the stabilization of the stock market.
Question 3 of 8
How did Ross Johnson's management style reflect the changing corporate culture of his time?
  • A. He was deeply loyal to his employees and focused entirely on long-term corporate stability.
  • B. He was notoriously frugal, cutting executive perks to maximize shareholder dividends.
  • C. He prioritized slow, organic growth over risky mergers and acquisitions.
  • D. He pledged allegiance to investors over the company, driving constant corporate shake-ups and enjoying a highly luxurious lifestyle.
Question 4 of 8
What caused the primary cultural friction when Nabisco merged with RJR Reynolds?
  • A. Nabisco's flashy, luxury-driven Northern culture clashed with RJR's conservative, Southern traditions.
  • B. RJR Reynolds' executives demanded an end to the production of Nabisco's less profitable snacks.
  • C. Both companies were facing imminent bankruptcy and fought over remaining assets.
  • D. Nabisco's strict adherence to 9-to-5 workdays angered RJR's workaholic management team.
Question 5 of 8
How did Henry Kravis and his firm KKR shift the paradigm of the LBO industry?
  • A. They lobbied the government to close the tax loopholes that made LBOs profitable.
  • B. They formed massive investment funds to execute the largest and most rapid corporate takeovers.
  • C. They focused exclusively on acquiring small, family-owned businesses to avoid media scrutiny.
  • D. They abandoned the use of debt financing in favor of purely cash-based transactions.
Question 6 of 8
Why was Ross Johnson's initial LBO bid for RJR Nabisco heavily criticized and ultimately doomed?
  • A. He offered a price per share that was significantly lower than the stock's current market value.
  • B. He partnered with LBO novices and demanded greedy terms, including massive personal payouts and bloated budgets.
  • C. He attempted to execute the deal entirely in secret, which violated federal securities laws.
  • D. He refused to utilize junk bonds, making it impossible to secure the necessary financing from Wall Street.
Question 7 of 8
What was the deciding factor that led the RJR Nabisco board to accept KKR's bid over Ross Johnson's final bid?
  • A. KKR's final bid was significantly higher than Johnson's final offer.
  • B. First Boston secretly provided KKR with the necessary financing at the last minute.
  • C. The board was repulsed by the public exposure of Johnson's greed and preferred KKR's promise to protect the company and its employees.
  • D. The federal government intervened and legally barred Johnson from purchasing the company.
Question 8 of 8
What was the ultimate fate of Ross Johnson following the RJR Nabisco buyout?
  • A. He lost his personal fortune and was forced to declare bankruptcy.
  • B. He was indicted for corporate fraud and served time in federal prison.
  • C. He was hired by KKR to manage their newly acquired assets.
  • D. He entered semiretirement with his wealth intact, forming a consulting firm and holding few regrets.

Barbarians at the Gate — Full Chapter Overview

Barbarians at the Gate Summary & Overview

Barbarians at the Gate (1989) tells the story of one of the largest corporate deals in US history, the leveraged buyout of RJR Nabisco. These blinks provide a gripping portrait of the extreme and extravagant behavior in corporate America during the 1980s.

Who Should Listen to Barbarians at the Gate?

  • Anyone working in finance or business who wants to learn about a legendary deal
  • Citizens appalled by the excesses of corporate America
  • Anyone enthralled by hostile takeovers and cutthroat dealings

About the Author: Bryan Burrough, John Helyar

Bryan Burrough and John Helyar are investigative journalists who covered the story of RJR Nabisco’s buyout as it happened. Their in-depth research and extensive interviews paint a fascinating picture of a unique period in the history of Wall Street.

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