Private equity in the 1980s
Within the broader private equity industry, two distinct sub-industries, leveraged buyouts and venture capital experienced growth along parallel although interrelated tracks.
The development of the private equity and venture capital asset classes has occurred through a series of boom and bust cycles since the middle of the 20th century.
The cycle which is typically marked by the 1982 acquisition of Gibson Greetings and ending just over a decade later was characterized by a dramatic surge in leveraged buyout (LBO) activity financed by junk bonds.
The success of the Gibson Greetings investment attracted the attention of the wider media to the nascent boom in leveraged buyouts.
Among the major firms founded in this period were: Additionally, as the market developed, new niches within the private equity industry began to emerge.
[24] The growth the industry was hampered by sharply declining returns and certain venture firms began posting losses for the first time.
Among the most notable corporate raiders of the 1980s were Carl Icahn, Victor Posner, Nelson Peltz, Robert M. Bass, T. Boone Pickens, Harold Clark Simmons, Kirk Kerkorian, Sir James Goldsmith, Saul Steinberg and Asher Edelman.
[30] In 1985, Milken raised $750 million for a similar blind pool for Ronald Perelman which would ultimately prove instrumental in acquiring his biggest target: The Revlon Corporation.
The Revlon takeover, because of its well-known brand, was profiled widely by the media and brought new attention to the emerging boom in leveraged buyout activity.
[citation needed] Leveraged buyouts in the 1980s including Perelman's takeover of Revlon came to epitomize the "ruthless capitalism" and "greed" popularly seen to be pervading Wall Street at the time.
The event was chronicled in the book, Barbarians at the Gate: The Fall of RJR Nabisco, and later made into a television movie starring James Garner.
Many of the major banking players of the day, including Morgan Stanley, Goldman Sachs, Salomon Brothers, and Merrill Lynch were actively involved in advising and financing the parties.
Additionally, many in RJR's board of directors had grown concerned at recent disclosures of Ross Johnson' unprecedented golden parachute deal.
TIME magazine featured Ross Johnson on the cover of their December 1988 issue along with the headline, "A Game of Greed: This man could pocket $100 million from the largest corporate takeover in history.
Unfortunately for KKR, size would not equate with success as the high purchase price and debt load would burden the performance of the investment.
[38] The split would ultimately prove acrimonious as Kohlberg sued Kravis and Roberts for what he alleged were improper business tactics.
Additionally, the RJR Nabisco deal was showing signs of strain, leading to a recapitalization in 1990 that involved the contribution of $1.7 billion of new equity from KKR.
Although private equity rarely received a thorough treatment in popular culture, several films did feature stereotypical "corporate raiders" prominently.
