Saturday, April 04, 2009

Wall Street in the 80s: unplugged and unravelled !!!

Wall Street in the 1980s was, by all accounts, on hell of a place to be in, provided you were at the right place at the right time !!.. Commonly reffered to as the 'decade of greed' , this was the heyday of new and esoteric financial wizardry (or 'conning' depending on where you stood) that seemed to engulf the American financial system. The "glory times" of the 80s have been portrayed in several forms of media, notably amongst them the 1987 movie 'Wall Street' starring Micheal Douglas and Charlie Sheen ("Greed, for want of a better word, is good") and in several books including 'The Bonfires of the Vanities' and Micheal Lewis's brilliant semi-autobiographical story ("Liars Poker") of his days as a bond salesman in Saloman Brothers ("Never before in the history of humanity have so many people become so rich with so little"). One amongst the several phenomenon that came into prominence was that of the leveraged buy-outs (LBO), wherein a group of investors take over a company using large amounts of borrowed money (hence leveraged buy outs). The second half of the decade saw numerous such deals, none of which was bigger or attracted more attention than the late 1988 takeover of RJR Nabisco. And the fascinating battle for control of RJR Nabisco has been chronicled in the all-time classic book 'Barbarians at the Gate', which I have just finished reading the second time (the first one was during my B-school days).
Written by then Wall Street reporters John Helyar and Bryan Burroughs, 'Barbarians at the Gate' has been widely regarded as one of the best business books ever. And few real-life events in the business world have been depicted so throughouly and thrillingly. However, along with the drame involved in the takeover battle, the authors also give us a glimpse into the mind of Wall Street in those days, where a number of so-called 'investment bankers', brokerages and lawyers made millions of dollars as fees advising Corporate America on everything including take-overs and LBOs. Also, it focusses on the king-size egos that the leading players in the drama had, none more evident that when the warring factions (the management team, Shearson Lehmann Hutton and Saloman Brothers on one side and Kohlberg Kravis and Drexel Burnham on the other) were close to joining forces, an otherwise minor detail on who should run the junk bond offering required to finance the deal resulted in a collapse of talks and resuming of hostilities. And as the hostilities increased, the bid value zoomed from $ 75 a share to almost $ 110, making it the costliest takeover of a company in American history (at $ 25 billion). All this and much more has been put to paper in a most engaging yet simple way, so that one need not be a finance graudate to understand the technicalities of the goings-on.

'Barbarians at the Gate' is one book that no one should miss !!..


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