STORYLINE

Henry Kravis is an American billionaire and co-founder of private equity firm Kohlberg Kravis Roberts & Co. (KKR). Placing a high value on privacy, Kravis declined to appear in the program himself, leaving the filmmakers to interview business magnates and Wall Street heavyweights to gain insight into the man behind the reputation. Considered an icon in the world of finance for defining the private equity industry, his role in molding Wall Street is described here by his peers and competitors in the financial world.

The son of a successful petroleum engineer, Kravis was born into wealth and mirrored his father's success in his own life, studying economics and moving to New York in the sixties, where he interned in finance and enrolled in Columbia's MBA program. Along with his cousin George Roberts, Kravis accepted a position with Bear Stearns where they began making deals known as "bootstrapping," now known as leveraged buyouts. Exceptionally skilled, shrewd and daring, Kravis was raking in money and made a partner at Bear Stearns by the age of 30.

By the mid-seventies Kravis and Roberts left Bear Stearns with their colleague and mentor Jerry Kohlberg to establish their own firm, KKR Investments, to continue their focus on bootstrap acquisitions. Convincing investors to support this endeavor based on his previous success with Bear Stearns, Kravis was able to build the company and his status with the buyout of Houdaille automotive for $106 million. The continued growth of KKR propelled Kravis' worth into the multi-millions.

After Kohlberg left KKR in the late eighties, the firm completed a leveraged buyout of RJR Nabisco. The dramatic conflict between Kravis and Nabisco CEO F. Ross Johnson was popularized by the book Barbarians at the Gate, which documented the bidding war that eventually ensued between the two, with Johnson ultimately losing.

Despite occasional obstacles including the bankruptcy of certain holdings and personal tragedies such as the loss of his teenage son, Kravis continued to improve profits and reinforce himself as an aggressive, effective dealmaker with billion dollar bank accounts to prove it. Giving only glimpses into the personal life and personality of Kravis, the film focuses instead on his reputation as a cunning businessman and financial tycoon.

Then cover the following topics carefully in your case report:

(1) A brief summary of the case.

(2) Discuss why the company is a good LBO candidate. What were the valuations? How did they come up with the valuations?

(3) Discuss the risks associated with LBOs, and how the buyout turned out for KKR's investors and other stakeholders ?