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Merchants of Debt: KKR and the Mortgaging of American Business
For more than a decade, Henry Kravis and George Roberts have been archetypes, first of Wall Street's boom years and then of its excesses. Their story and that of their firm - the biggest, most successful and most controversial participant in the age of leverage - illuminates an entire era of financial high jinks and speculative mania.
364 pages, Paperback
First published March 24, 2013
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Displaying 1 - 25 of 25 reviews
August 17, 2017
An engrossing and thorough history of KKR and the LBO craze of the 1980s. However, it suffers by comparrison to Barbarians at the Gate, an account of the firm's most famous buyout (RJR Nabisco), which delves at some depth into KKR's origins. If you have read Barbarians--if not, you should--Merchants of Debt is relatively duplicative. As the publication date suggests, you should look elsewhere (I suggest Kings of Capital) for a depiction of how 1980s buyout firms evolved into the private equity industry.
January 10, 2024
I first read this book not long after its publication in the early 1990s, coincidentally not long after I had been fired from my job as a junkbond salesman. Back then, even though I had spent 5 years in the trenches as a bondsalesman (Treasury, MBS, investment- and junk-grade corporate bonds), I had very little perspective on what the business of Wall Street entailed, especially the history of LBO lending.
(Wall Street's business entails selling embedded-option risk: customers buy products that are themselves "short" some kind of embedded financial risk. The product's expected yield reflects an enhanced (basis point) return paid to buyers for their willingness to absorb a financial risk. The basis points subtracted or "shaved" from the customer's return underwrites the broker-dealers' expenses. (After all, If every investor received their just desert, who would scape whipping?)
Reading Anders' account of the leveraging-up cycle of the 1980s hit me with the force of something like a revelation. The scales fell from my eyes. I came to see my previous "labors" in a completely different light.
Fun fact: as a teenager I had occasionally caddied for both Donald Kelly and J. Ira Harris, two characters who make cameo appearances in Anders' story.
As a young bondsalesman in the mid-to-late 1980s, I made "caddy" money hawking the junkbonds created by Kelly, Harris, & KKR's dealmaking. I'll never forget when the junkbonds for the Beatrice LBO freed-up to trade; it was the highwater mark of the go-go 1980s, followed not long thereafter by LBOs with much greater (worse) leverage ratios, like RJR.
What I love about this book is its recitation of details — events & conversations which reveal something of the intellectual currents of that era, the cosmos of ideas seemingly omnipresent in that era that would underwrite years, even decades, of leveraging-up that is only now (maybe?) petering out.
Having recently reread this book — and several of its referenced sources — I want to say that this book is still great, still timely, relevant & informative.
I regret that George Anders hasn't published or said much about private-equity investing in recent years, which I think a great shame given his expertise and the recent discussions about PE occasioned by Mitt Romney's campaign.
Hopefully Anders will someday publish an entirely new book on this subject, picking up where this one ends. I'd love to read a long addendum to this book from the author letting us know what he thinks now, with the benefit of 30 years of hindsight, of the legacy of LBO lending.
(Wall Street's business entails selling embedded-option risk: customers buy products that are themselves "short" some kind of embedded financial risk. The product's expected yield reflects an enhanced (basis point) return paid to buyers for their willingness to absorb a financial risk. The basis points subtracted or "shaved" from the customer's return underwrites the broker-dealers' expenses. (After all, If every investor received their just desert, who would scape whipping?)
Reading Anders' account of the leveraging-up cycle of the 1980s hit me with the force of something like a revelation. The scales fell from my eyes. I came to see my previous "labors" in a completely different light.
Fun fact: as a teenager I had occasionally caddied for both Donald Kelly and J. Ira Harris, two characters who make cameo appearances in Anders' story.
As a young bondsalesman in the mid-to-late 1980s, I made "caddy" money hawking the junkbonds created by Kelly, Harris, & KKR's dealmaking. I'll never forget when the junkbonds for the Beatrice LBO freed-up to trade; it was the highwater mark of the go-go 1980s, followed not long thereafter by LBOs with much greater (worse) leverage ratios, like RJR.
What I love about this book is its recitation of details — events & conversations which reveal something of the intellectual currents of that era, the cosmos of ideas seemingly omnipresent in that era that would underwrite years, even decades, of leveraging-up that is only now (maybe?) petering out.
Having recently reread this book — and several of its referenced sources — I want to say that this book is still great, still timely, relevant & informative.
I regret that George Anders hasn't published or said much about private-equity investing in recent years, which I think a great shame given his expertise and the recent discussions about PE occasioned by Mitt Romney's campaign.
Hopefully Anders will someday publish an entirely new book on this subject, picking up where this one ends. I'd love to read a long addendum to this book from the author letting us know what he thinks now, with the benefit of 30 years of hindsight, of the legacy of LBO lending.
July 15, 2010
An excellently written if occasionally dry account of Kohlberg Kravis Roberts' reign over the leveraged buyout era on Wall Street. Some of the social costs of LBOs are detailed, although not quite as thoroughly as I might've liked. When LBOs were successful, they worked out spectacularly well for the dealmakers (KKR, Wall Street lawyers and bankers, commercial bankers), the target companies' senior executives, and shareholders, not as well for rank and file employees of the purchased companies, who were often laid off by the hundreds or thousands as management shut plants, factories, and stores to boost profits and pay down debt. Anders, writing in 1992, ends on an overly optimistic note: "... it is unlikely that any credit cycle for decades will be as drastic as the swing from the giddiness of 1987 to the panic of 1990. Chastened lenders can be counted on to avoid a precise repeat of the follies of the 1980s for a long time."
October 2, 2017
A highly engaging story and the most definitive history of the private equity and LBO powerhouse KKR from its origins in 1976 to the peak of its power in the mid to late '80s and eventual transformation to a steadier, more conventional entity circa 1992. The book is not only the story of KKR but also in a large part that of the LBO industry's origins.
The narrative prowess doesn't quite match that of Barbarians at the Gate (which incidentally is the story of the most expensive and marquee deal KKR has done) but is nevertheless good enough. While Barbarians... kind of wraps up the post-deal story in a hurry in a few pages, Merchants of Debt dwells at length on what it took KKR to rescue the deal and the firm itself. The principal characters i.e. the partners of KKR are etched out in sufficient detail. KKR's success, however, was a result not just of the skills and enterprise of its partners but also fortuitous circumstances such as favorable laws, a favourable judicial system, a pro-free-market government and hence benign regulators. Once the optics turned ugly, the public opinion shifted for the worse and the loopholes in tax rules and other laws closed fairly quickly to make business-as-usual untenable. KKR recognized this and adapted to the times by reorienting its business model. The epilogue gives some details on KKR's business today and the various other areas apart from buyouts that it has expanded to by way of keeping the book updated. The appendix gives basic details of all the 40-odd buyouts that KKR did from 1976-1992. Overall, Merchants of Debt is a balanced and neutral account of its subjects. It doesn't gloss over inconvenient facts and presents views from both sides of the divide- the Wall Street as well as the politicians and the public. It is non-judgemental, choosing to let facts and research speak for themselves.
Merchants of Debt is a historical narrative, not a technical book so one wouldn't be any wiser about the mechanics of individual deals upon reading of this book. One has to turn to "The New Financial Capitalists" for that, which I intend to shortly. This latter started out being written as an institutional record of KKR's business on the instructions of George Roberts (the "R" in KKR) but was turned into a project to be published for the general public. It draws upon detailed KKR records and focuses on the technical.
The narrative prowess doesn't quite match that of Barbarians at the Gate (which incidentally is the story of the most expensive and marquee deal KKR has done) but is nevertheless good enough. While Barbarians... kind of wraps up the post-deal story in a hurry in a few pages, Merchants of Debt dwells at length on what it took KKR to rescue the deal and the firm itself. The principal characters i.e. the partners of KKR are etched out in sufficient detail. KKR's success, however, was a result not just of the skills and enterprise of its partners but also fortuitous circumstances such as favorable laws, a favourable judicial system, a pro-free-market government and hence benign regulators. Once the optics turned ugly, the public opinion shifted for the worse and the loopholes in tax rules and other laws closed fairly quickly to make business-as-usual untenable. KKR recognized this and adapted to the times by reorienting its business model. The epilogue gives some details on KKR's business today and the various other areas apart from buyouts that it has expanded to by way of keeping the book updated. The appendix gives basic details of all the 40-odd buyouts that KKR did from 1976-1992. Overall, Merchants of Debt is a balanced and neutral account of its subjects. It doesn't gloss over inconvenient facts and presents views from both sides of the divide- the Wall Street as well as the politicians and the public. It is non-judgemental, choosing to let facts and research speak for themselves.
Merchants of Debt is a historical narrative, not a technical book so one wouldn't be any wiser about the mechanics of individual deals upon reading of this book. One has to turn to "The New Financial Capitalists" for that, which I intend to shortly. This latter started out being written as an institutional record of KKR's business on the instructions of George Roberts (the "R" in KKR) but was turned into a project to be published for the general public. It draws upon detailed KKR records and focuses on the technical.
March 29, 2018
I read this book after reading Barbarians at the Gate a few months back . I read this book to get a broader understanding of private equity in the "Age of Leverage." The book did well to chronicle all of the events that brought KKR to success and how they withstood some of the tremendous challenges along the way (from the junk bond market crash to the transition to equity finance). However, I thought the book spent too much time scratching the surface of many deals, especially when it came to how the firm raised money. I would have been even more interested to go in depth on how KKR would restructure their portfolio companies to achieve their astronomically high rates of return for their investors (beyond selling off weak divisions, lowering wages, or "improving efficiencies"). Overall, solid read. Would recommend.
May 7, 2021
Writing: 4/5
Knowledge Gained: 5/5
Enjoyment: 4/5
I’ll go ahead and write a short epilogue for the book:
Jerry Kohlberg did quite well for himself and his son James “Jim”. He died of (cancer and old age) at 90. His son continues to serve as chairman on Kohlberg & co, as of writing, owns multiple companies such as cadence and sara lee.
Although I wouldn’t say this is the best book, it’s quite conclusive, and a “short” read with most of the facts you need, although some parts are a bit windy and could be shortened, in general, the author did a great job.
It basically describes the start of KKR, the key people, as well as Drexel lambert (a company nigel farage worked for) and the aftermath after the collapse of many junk bonds in the early 90’s and how KKR is faring these days.
Suggested readings if you haven’t already: barbarians at the gates (about rjr Nabisco)
Knowledge Gained: 5/5
Enjoyment: 4/5
I’ll go ahead and write a short epilogue for the book:
Jerry Kohlberg did quite well for himself and his son James “Jim”. He died of (cancer and old age) at 90. His son continues to serve as chairman on Kohlberg & co, as of writing, owns multiple companies such as cadence and sara lee.
Although I wouldn’t say this is the best book, it’s quite conclusive, and a “short” read with most of the facts you need, although some parts are a bit windy and could be shortened, in general, the author did a great job.
It basically describes the start of KKR, the key people, as well as Drexel lambert (a company nigel farage worked for) and the aftermath after the collapse of many junk bonds in the early 90’s and how KKR is faring these days.
Suggested readings if you haven’t already: barbarians at the gates (about rjr Nabisco)
September 28, 2019
So good - picked this up after eBoys, and it felt like an extension of the form of early-days-to-now storytelling.
March 19, 2023
This book was an informative depiction of KKR’s origins and rise throughout the 1980s. Although the book mostly centered around the firm’s deals, I almost found the dynamics within the team itself to be just as enthralling as the gigantic buyouts that cemented their names in history. Anders did a fantastic job of researching in order to write this book. I also greatly appreciated the multifaceted commentary on the 80s buyout boom as well as the debt financing stories related to Drexel Burnham Lambert and Milken. The book ultimately finishes in the early 90s with a gloomy view of the future of buyouts, yet as we all have witnessed, the days of the buyout have continued well past this era in history (although at the time that I am writing this, it appears that an eerily similar view can be adopted within the context of today’s tough credit environment). The end of the book does in fact reference credit cycles, and it is no surprise to me that history has repeated itself. Overall, I found reading about this era of private equity to be vastly informative to my understanding of the history of buyouts.
Read
October 11, 2023Not rating because I wasn't in the right mindset to give this a fair shot. I just came off Barbarians at the Gates not long ago and this struck me as too similar, even though it does worthwhile reporting of its own. As a whole, however, I think I am far less interested in this sort of narrative non-fiction following business personalities than in non-fiction that advances an argument.
September 13, 2022
Engrossing write up on the "Kings of Debt" and pioneers in LBO during the roaring 80's. Highlight would be the RJR Nabisco deal which was pinnacle of LBO tsunami and also how that deal changed the opinion of not only Wall Street but also Main Street.
July 8, 2018
Excellent book for laymen
The book was informative as to the story. As an industry professional, I would have preferred a more technical approach, but a good entertaining read.
The book was informative as to the story. As an industry professional, I would have preferred a more technical approach, but a good entertaining read.
January 11, 2021
Decent, not great. No where near cable cowboy, etc
May 13, 2024
Superb early history of KKR.
June 30, 2025
Really great historical account of the founding of KKR and the roots of the buyout business. In my view, it’s not nearly as boring as that first sentence makes it sound.
June 14, 2022
An overview of the early years of KKR with a final chapter (in the updated version from 2013) providing somewhat of an epilogue on where KKR is today and how some of the protagonists of this tale have fared over the years.
The book is structured in several non-chronological chapters most of which discuss different elements of the buyout strategy (e.g. charming CEOs to induce buyout participation, discipline through debt, deal structuring, etc.) and some discussing more historical issues (e.g. the departure of Kohlberg, the rise and demise of the relationship with Drexel, the aftermath of the RJR buyout). So this story about KKR is not told in chronological order but more in terms of issues that are/were important to KKR throughout their (brief) history. Each chapter will then delve into the history of KKR to look at how some of these issues developed over time.
There were very interesting (and rather detailed) examples of how KKR targeted companies, structured deals with extreme leverage, and then stood back to make management implement their restructuring plans (which invariable focussed on cost savings and selling off parts of a company). Chapters that were particularly interesting were on the departure of their partner Kohlberg, the breadth of their holdings across all industries, and the discipline in implementing their strategies and (without any sentiment) selling their companies.
Yes there are other books that describe some of the events in this book in greater details (e.g. Den of Thieves for the adventures with Drexel, or Barbarians at the Gate for the transaction regarding RJR Nabisco), but this book very much concerns the perspective from KKR's side, and so still provided some other interesting insights.
Overall I preferred the style of a book like The King of Capital (which provides a history of Blackstone) but this book is certainly worth reading if you have an interest in private equity and dealmaking. All in all worth a read.
The book is structured in several non-chronological chapters most of which discuss different elements of the buyout strategy (e.g. charming CEOs to induce buyout participation, discipline through debt, deal structuring, etc.) and some discussing more historical issues (e.g. the departure of Kohlberg, the rise and demise of the relationship with Drexel, the aftermath of the RJR buyout). So this story about KKR is not told in chronological order but more in terms of issues that are/were important to KKR throughout their (brief) history. Each chapter will then delve into the history of KKR to look at how some of these issues developed over time.
There were very interesting (and rather detailed) examples of how KKR targeted companies, structured deals with extreme leverage, and then stood back to make management implement their restructuring plans (which invariable focussed on cost savings and selling off parts of a company). Chapters that were particularly interesting were on the departure of their partner Kohlberg, the breadth of their holdings across all industries, and the discipline in implementing their strategies and (without any sentiment) selling their companies.
Yes there are other books that describe some of the events in this book in greater details (e.g. Den of Thieves for the adventures with Drexel, or Barbarians at the Gate for the transaction regarding RJR Nabisco), but this book very much concerns the perspective from KKR's side, and so still provided some other interesting insights.
Overall I preferred the style of a book like The King of Capital (which provides a history of Blackstone) but this book is certainly worth reading if you have an interest in private equity and dealmaking. All in all worth a read.
January 20, 2023
This is a story how Kohlberg, Kravis and Robert (KKR) and their firm buyouts. The amount starts small but throughout the story, it goes bigger and bolder. We are talking about billions of dollars deal. What I like about these buyouts are, at some point they did help a lot of these firms but at some other point, the impact felt by the laid-off employees, shutting down factories and stores…if only we could find other ways. It was necessary but they did get back on track making money, paying off debts. This book was recommended by a friend and beyond my comfort zone. However, I’m grateful that the author did a tremendous job making it enjoyable to a layman like myself to read.
December 29, 2015
Amazing insights in the growth of KKR partners in early years and the LBO market that prevailed during 1980s in Wall Street. Also liked the fact that Henry Kravis asking young students to go for science and arts degrees as most of the invention and easy stuff in the world of finance was already done.
October 19, 2020
An interesting portrayal of KKR.
It doesn't quite bring the characters alive as much as Den of Thieves does, but it is an interesting way to get to know the private equity industry.
What strikes me the most is the loyalty of KKR people. Perhaps a factor of their small headcount, it's truly remarkable that despite all the criticisms and crises they faced, only one of the partners left.
It doesn't quite bring the characters alive as much as Den of Thieves does, but it is an interesting way to get to know the private equity industry.
What strikes me the most is the loyalty of KKR people. Perhaps a factor of their small headcount, it's truly remarkable that despite all the criticisms and crises they faced, only one of the partners left.
August 17, 2023
Paints a great story of what Kohlberg, Kravis and Roberts were like both professionally and personally. Gives you a good picture of 1970s - 90s. Gets a bit repetitive after a while since we review so many deals. Don’t like authors bias against PE that’s based more on anecdotes than facts and logic.
March 22, 2008
Interesting reading on near-callous use of debt in the 1980s, especially in light of the current economic melt-down of 2007 & 2008, i.e, Bear, Stearns and CIT, just to name the ones collapsing in the past 7 days.
April 18, 2022
KKR were a precursor to the re-emergence of the new breed of Philanthro/Oligarch robber barons.
The genesis of the 1980's boom-bust looting was the "Energy Crisis of the 1970s, re-read this book after this one.
https://www.goodreads.com/book/show/3...
The genesis of the 1980's boom-bust looting was the "Energy Crisis of the 1970s, re-read this book after this one.
https://www.goodreads.com/book/show/3...
February 1, 2023
This is a great book for helping to understand the buyout industry and specifically the KKR business model. It is quite boring in some areas, but it is very detailed. I specifically chose to read the full version and would most likely read the concise version if I were to do it again.
Read
May 26, 2016Generally entertaining but sometimes a bit slow. Would recommend it to people interested in finance.
March 27, 2017
The author did a superb job on this book. He interviewed 243 people for this book. It was researched very well.
Displaying 1 - 25 of 25 reviews