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The Thesis
KKR's $25 billion buyout of RJR Nabisco was the deal that defined the leveraged buyout era, proving that financial engineering and operational improvement could unlock value in America's largest corporations.
The Story
In 1989, KKR completed the $25 billion acquisition of RJR Nabisco in what was the largest leveraged buyout in history at the time. The deal, immortalized in the bestselling book "Barbarians at the Gate," became the defining moment of the 1980s LBO boom. Henry Kravis outbid RJR's own management team in a dramatic, weeks-long battle that captivated Wall Street and made front-page news across America.
While the financial returns on RJR itself were modest compared to KKR's other deals, the transaction's true impact was transformational for the entire financial industry. It proved that private equity could acquire companies of virtually any size, and it established the template for modern corporate buyouts. The deal made Kravis a household name, attracted enormous capital to the private equity industry, and spawned the modern age of institutional leveraged investing. KKR's $25 billion check proved that boldness, properly structured, could reshape entire industries.
Key Insight
Some trades change the rules of the game itself — the greatest impact isn't always measured in percentage returns but in the doors they open for future generations.
“If you don't have integrity, you have nothing. You can't buy it. You can have all the money in the world, but if you're not a moral and ethical person, you have nothing.”
Henry Kravis
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See how Glen Bradford applies these principles to his own investing. Long Fannie Mae & Freddie Mac junior preferred — conviction meets patience.