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The New Financial Capitalists
Book

The New Financial Capitalists

Kohlberg, Kravis, Roberts and the Creation of Corporate Value

George P. Baker and George David Smith
Cambridge UP, 1998

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Editorial Rating

6

Qualities

  • Comprehensive
  • Background

Recommendation

This revealing book covers a highly charged and controversial period of American investment history. George P. Baker and George David Smith study the emergence of the investment house Kohlberg, Kravis, Roberts (KKR) and follow it during the decade KKR ruled the world of leveraged buyouts. The authors begin with the early days when the partners worked together at Bear Stearns. They track the men as they build their own firm and create their own success. In clear, straightforward language, the book presents KKR’s intentions and the economics of leveraged buyouts (LBOs). It discusses KKR’s role in structuring and managing the deals. getAbstract recommends this book as a must read for anyone interested in LBOs or the history of KKR. Executives at all levels will find the KKR saga interesting and useful.

Take-Aways

  • A leveraged buyout (LBO) is like buying a house; the purchaser expects a good return on the investment.
  • The partners in Kohlberg, Kravis, Roberts (KKR) modernized the European concept of merchant banking to establish the LBO industry.
  • Requiring managers to become equity investors in the leveraged company is critical to the venture’s success.

About the Authors

George P. Baker, a Harvard Business School business administration professor, holds his Ph.D. in business economics and a Harvard MBA. He is an associate editor of the Journal of Financial Economics, and a director of Clear Communications, Inc. His many articles cover management incentives, leveraged buyouts, and organizational economics. George Davis Smith, clinical professor of Economics and International Business at New York University Stern School of Business, earned his Ph.D. in history from Harvard in 1976. A consultant to major corporations, he has written numerous articles and four books, including Anatomy of a Business Strategy and From Monopoly to Competition.

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