In business history, few deals have received the notoriety as that chronicled in the 1990 book "Barbarians At The Gate" , written by Brian Burroughs and John Helyar.

The story was also turned into a movie of the same name starring James Garner.

The book spins the tale of F. Ross Johnson, the former CEO of RJR Nabisco.

Although failry well-off as the steward of a massive corporation, Mega Mogul wannabee Johnson, made a simple plan to join the ranks of other 1980s takeover artists such as Carl Icahn, T. Boone Pickens, and Ron Perlman.

A Simple Plan

F. Ross Johnson's simple plan was to offer about $75 for each share of RJR Nabisco stock in a move to take the firm private in what's called a leveraged buyout, or LBO.

He could then say, without much resistance from other stockholders, "It's Mine ... All Freakin' Mine!"

If Johnson was successful, he stood to make over $100,000,000 on the deal!

And he was held up by the media as the epitome of greed.

Unfortunately for him, he had apparently made a verbal agreement with the big bad wolf of private equity firms in the 1980s, Kolberg Kravis Roberts, or KKR.

Private equity firms typically get loads of money from insurance companies, college endowments, and pensions funds to invest in the buying out of companies. And their returns can run in the 30% to 40% range.

Emerging growth Moguls should be aware of these private equity firms. They could be a future source of financing, or a potential buyer for your business.

Anyway, the two Mega Moguls running KKR, Henry Kravis and George Roberts, didn't take too kindly to F. Ross Johnson backing out of his alleged agreement with them in order to go it alone. And they wanted to teach him a lesson.

So with tempers a-flaring, there erupted a bidding war between KKR and Johnson's team.

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But Wait There's More!

Another bidder, called Forstmann Little, also entered the fray. Forstmann Little, led by Ted Forstmann, was another big private equity firm. And Ted Forstmann was the self-described arch enemy of KKR and the junk-bond financing it used in deals.

WIth these three bidders competing for the prize, the price escalated until KKR hit the winning bid at $109 per RJR share.

This brought the total price up to a whopping ... $25,000,000,000!

It was, and might still be, the largest LBO by a single private equity firm in history.

F. Ross Johnson didn't get his corporate prize. But he reportedly did get over $50,000,000 when all was said and done.

Over the years, KKR reportedly received a decent return on its investment, but nothing near the typical 30% to 40% returns. And, because so much debt was used to complete the acquisition, it was a troubled deal from the start.

And then of course, there were all of the lawsuits over tobacco and smoking.

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Lessons!

So, for the Mega Moguls at KKR, the question is ....

Was it really worth it?

Sometimes the pretty little deal that you prize so much, driven by ego, greed, and vengeance, ends up being a two ton alligator, ready to bite you into little pieces and serve you up on a dish with Grey Poupon.

So, on the 20th anniversary of this deal, here's one lesson you should take away:

Let good business sense and smart strategy drive your decisions. Decisions based purely on greed and ego, might have you working the late shift as the main course for your friendly neighborhood alligator.

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Listen To My Interviews With Emerging Growth Executives Who Are Working On Their Own Mega-Deals!

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