king of capital_ the remarkable - david carey

[...]... were often sold o Together these trends ensured a steady diet of acquisition targets for the buyout firms But it was the advent of a new kind of nancing that would have the most profound e ect on the buyout business Junk bonds, and Drexel Burnham Lambert, the upstart investment bank that single-handedly invented them and then pitched them as a means to nance takeovers, would soon provide undreamed -of. .. LBO?’ All of a sudden this small out t, three guys—Kohlberg and Kravis and Roberts—is making an offer for a public company What’s that all about?” The nancial techniques behind Houdaille, which also underlay the private equity boom of the rst decade of the twenty- rst century, were rst hatched in the back rooms of Wall Street in the late 1950s and 1960s The concept of the leveraged buyout wasn’t the product... oversee the turnaround of General Motors Corporation, it named David Bonderman, the founder of Texas Paci c Group, and Daniel Akerson, a top executive of Carlyle Group, to the carmaker’s board of directors The crisis of 2007 to 2009 wasn’t the rst for private equity The buyout industry su ered a near-death experience in a similar credit crunch at the end of the 1980s and was wounded again when the technology... Houdaille came to be recognized as the industry’s Big Bang the deal that more than any other touched o the ensuing explosion of LBOs Doggedly gathering new capital every two years or so and throttling up the scale of its deals, by the mid1980s KKR dominated buyouts in the way that IBM lorded over the computer business in the 1960s and 1970s In the early days of the buyout, many of the target companies were... wonderfully in a rising market that sustained the lofty multiples But reality caught up with the conglomerates at the end of the 1960s, when a bear market ravaged stocks, the numbers game zzled out, and investors cooled to the conglomerate model They came to see that the earnings of the whole were not growing any faster than the earnings of the parts, and that the surging earnings per share was ultimately... that their real competition came from beyond the walls of the rm Lehman’s partners seemed to believe that their chief competition came from inside The Lehman in ghting amazed outsiders “I don’t understand why all of you at Lehman Brothers hate each other,” Bruce Wasserstein, one of the top investment bankers of the time, once said to Schwarzman and another Lehman partner “I get along with both of you.”... most of his fellow bankers labored on amid the rancor But in the spring of 1984, Glucksman’s traders su ered another enormous bout of losses and Lehman’s partners found themselves on the verge of nancial ruin, just as they had a decade earlier Glucksman, though still CEO, lost his grip on power and the partners were bitterly divided over whether to sell the rm or tough it out If they didn’t sell, there... manufacturer of sophisticated pharmaceutical packaging It has also staked start-ups, including an oil exploration company that found a major new oil eld o the coast of West Africa None of these fit the cliché of the strip-and-flip Contrary to the allegation that buyout rms are just out for a quick buck, CEOs of companies like Merlin and Gerresheimer say they were free to take a longer-term approach... 2009, a barometer for the buyout business as a whole LBOs were not the root cause of the nancial crisis, but private equity was caught in the riptide when the markets retreated Well-known companies that had been acquired at the peak of the market began to collapse under the weight of their new debt as the economy slowed and business dropped o : household retailer Linens ’n Things, the mattress maker Simmons,... for their customers, but also for their own account, taking big risks in the process Rivers of securities ow daily through the trading desks of Wall Street banks Most of these stakes are liquid, meaning that they can be sold quickly and the cash recycled, but if the market drops and the bank can’t sell its holdings quickly enough, it can book big losses Hence banks need a cushion of capital to keep themselves . and the Rising Sun colophon are registered trademarks of Random House, Inc. Library of Congress Cataloging-in-Publication Data Carey, David (David Leonard), 1952– King of capital / David Carey. was shaping up to be the social event of the season, if not the era. By then, the buzz had been building for weeks. Stephen Schwarzman, cofounder of the Blackstone Group, the world’s largest private. remained under the control of their founders, who still called the shots internally and, ultimately, at the companies they owned. Had there been any time since the robber barons of the nineteenth century