Assignment #3: Leveraged Buyouts- the Case of RJR Nabisco
Use the following resources for this assignment:
- Watch the documentary: “Henry Kravis: How Corporate Titan Rocked Wall Street” https://www.youtube.com/watch?v=OtKizreanP0
- Background information about the buyout: “Barbarians’ Revisited (Bloomberg, April 1995)
- Analysis of the case: “RJR Nabisco: A Case Study of a Complex Leveraged Buyout” (Financial Analyst Journal, 1991)
Then cover the following topics carefully in your case report:
- A brief summary of the case.
- Discuss why the company is a good LBO candidate. What were the valuations? How did they come up with the valuations?
- Discuss the risks associated with LBOs, and how the buyout turned out for KKR’s investors and other stakeholders.
Please submit a full 3-page (not longer than 4 pages, with about equal coverage on the topics above; not including references or tables if there is any, which should be in appendix) report about this case study. Use the formatting as of this document (1” margin, Times New Roman font size 12, and double space).
preview of the answer..
Henry Kravis was born in a well off family in Oklahoma, his father was a successful petroleum engineer. After graduating with a major in economics, he resumed his studies acquiring a Masters in Business Administration. He worked with his cousin George in a legendary investment bank for a while. The cousin proposed to the investment bank that they wanted to start a separate Leverage Buyout department but their suggestions were rejected by the investment bank. Kravis and his cousin quit their jobs to open their maiden Leverage Buyout Company, KKR with an investment of $40,000 (YouTube, 2016) .The main objective of the company was to mobilize money..