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Barbarians At The Gate Movie Analysis Essay


"Barbarians at the Gate, a made-for-HBO movie, recounts the events surrounding the biggest leveraged buyout in history, that of RJR Nabisco in 1988. Based on the bestseller of the same name, this film presents in some detail the process by which RJR Nabisco's CEO F. Ross Johnson (James Garner) attempts to buy out his own company. Of greater interest, however, is the power struggle that develops between Johnson and Wall Street investment banker Henry Kravis (Jonathan Pryce), who intends to force Johnson out and take over RJR Nabisco on his own.

In general, the quality of most made-for-TV movies is abysmal. Low production values, shoddy direction, and poor acting abound. There are exceptions, of course, but not many. For that reason, in a year when there have been three too many Amy Fisher movies on the small screen, it's refreshing to come upon something with the intelligence, wit, and general high quality of Barbarians at the Gate.

This story of high stakes, betrayal, and one-upsmanship is told with undeniable flair, using a lighthearted, occasionally playful, tone. The film offers a different point-of-view on leveraged buyouts and other such mega-buck dealings. Most of us are used to looking in from the outside on these high-profile financial struggles; Barbarians at the Gate presents an insider's perspective -- and not just any insider, but that of the man at the top.

It's a credit to the production team that they're able to do so much with this movie. There's a lot of dry humor, a fair amount of tension, and numerous subtle-yet-pointed jabs at a "game" that rewards the losers with $23 million (after taxes). Pacing is excellent, especially during the last half-hour as the story builds to its climax. The furious rushing around of the characters is effectively translated to the audience. Whether you know the outcome or not, Barbarians at the Gate is captivating.

One would think that it would be difficult, if not impossible, to present a story with someone like F. Ross Johnson as the protagonist. After all, this is a very rich man involved in the kind of financial slight-of-hand that most Americans despise. However, screenwriter Larry Gelbart (taking cues from the Burrough/Helyar book) has managed to make Johnson a sympathetic and often-likable figure. Admittedly, the movie takes liberties. Some of Johnson's less-admirable traits have been downplayed, and he's presented as caring more about the work and the people who do it than the money he stands to make.

If this isn't the best performance of James Garner's career, it certainly tops his recent credits. It's difficult to gauge how much of the audience's rapport with Johnson comes as a result of the actor playing the role, but the job done by Garner is no small factor. His portrayal perfectly mixes greed, humanity, good-naturedness, and incompetence. As Henry Kravis, Jonathan Pryce is equally as good, albeit with less screen time. Pryce makes the most of his opportunities and, although the Kravis is presented as a two-dimensional villain, Pryce's steely-eyed, tight-lipped performance gives the audience a good sense that this man should be feared.

These strong performances, coupled with a lively, clever script, are enough to draw the audience into the world of F. Ross Johnson. His morals, like those of anyone in a situation where a million dollars is small change, are twisted, and the film delights in showing this in several wickedly-funny scenes. Nevertheless, the presentation of how he manages -- and sometimes mismanages -- the buyout is fascinating. Even more engaging is the battle between Johnson and Kravis, which has all the drama of a high-stakes chess match. So, as much as the average person despises financial fakery that results in thousands of lost jobs, Barbarians at the Gate, by looking at the situation from a different perspective, turns this matter into thought-provoking entertainment."
A review by James Berardinelli writen in 1993 (recorded here just in case it gets lost)

$18.9 billion. Drexel Burnham Lambert provided a $5 billion bridge loan, KKR transferred $2 billion, and Manufacturers Hanover Trust Co. arranged a global syndicate for $11.9 billion.

What the losers got:
Ross Johnson received $53 million.
Ed Horrigan $45.7 million.
John Martin $18.2 million.

The Fees -
Drexel Burnham Lambert - $227 million plus undisclosed fees from issuing the junk bonds.
Merrill Lynch - $109 million.
Kohlberg Kravis Roberts (KKR)- $75 million from its investors.
Morgan Stanley - $ 25 million.
Wasserstein, Perella - $ 25 million.
Bank syndicate of 200 institutions - $325 million.

The following are some highlights from the film...

LAURIE: Ross? Promise you won't think I'm stupid?
  ROSS: Of course, not.
        Although, I have been known to break my promises.
LAURIE: There's so much of this I just don't get.
        Insider trading. Junk bonds.
        Even this buy out thing you're talking about.
  ROSS: Sweetheart, half the people involved don't know what's going on.
        Buy outs are not all that hard, really. . . .
        Basically, all a buy out means is that management -- the team that runs the company --
        they buy out all the shareholders, and the company goes from being public to being private.
LAURIE: Doesn't that take a ton of money?
  ROSS: That's where the Kravis types come in.
        They help you borrow what you need against the value of the company.
        You use the business as collateral.

In this scean Ross Johnson is to meet his very wealthy adversary, Henry Kravis, the king of leveraged buyouts
 KELLY: Ross.
BUTLER: Will you have a drink, sir?
  ROSS: Scotch and soda. No ice. No soda.
BUTLER: Thank you, sir.
        (Ross looks around the opulent apartment and is clearly dazzled.)
 KELLY: Be it ever so humble, huh?
  ROSS: Guy must've had a hell of a week. (As Ross inspects a painting.)
 KELLY: Renoir.
  ROSS: Ball park?
 KELLY: Twenty, thirty million.
  ROSS: Is that with the frame?
        (He moves to the next painting, looks for the signature.)
 KELLY: Monet.
  ROSS: Right. Tons of it.
        (Henry Kravis appears quietly, trying to exuding his unmistakable authority.)
  ROSS: Listen, Henry, if there's anything you need--if you're hurting in any way--all you have to do is ask.

  ROSS: We've spent seven hundred and fifty million dollars and we've come up with a turd with tip?
        God, almighty, Ed.
        We poured enough technology into this project to send a cigarette to the moon,
        and all we got out of it is one that tastes like it took a dump. . . .
        Tastes like shit and smells like a fart.
        We got ourselves a real winner here.
        It's one Goddamn unique advertising slogan, I'll give you that. . . .
        How do we get it shitless?

To learn more about KKR and Henry Kravis, follow this link. Be forewarned, its freighting.


It is now 20 years since the mother of all corporate-takeover battles ended, when the private-equity firm, Kohlberg Kravis Roberts (KKR), acquired RJR Nabisco for $25 billion. A new edition of the best-seller about the battle, “Barbarians at the Gate”, by Bryan Burrough and John Helyar, has been published to mark the anniversary. Already widely regarded as one of the best business books of all time, the 2008 edition includes a fascinating extra chapter, updating the story.

Ross Johnson, the former chief executive of RJR Nabisco, is reportedly living a happy semi-retirement in Florida, bearing no ill will to anyone from back then, though it seems he doth protest a little too much that he secured a fantastic deal for the firm's shareholders. Ted Forstmann, another private-equity legend, who fought hard to block KKR, is “still a little angry”, and the “one thing he wants readers to know” is that “it was he, Ted Forstmann himself, who coined the title of this book”.

Bloomberg

Henry Kravis, meanwhile, is “just where we left him, in a conference room in KKR's 42nd-floor offices at Nine West.” As the authors note, in the past 20 years KKR has enjoyed spectacular growth, with (at the time the book went to press—a couple of important months ago) $52 billion in assets under management, having grown from 32 employees in two offices to 400 professionals in a dozen offices around the world. KKR led a consortium that paid a record $45 billion for TXU, a Texas utility, in 2007—just before the credit crunch brought private-equity deal-making to an abrupt halt.

Of course, the industry's big change since 1988 is that it has rebranded itself as “private equity”. KKR et al used to be known as leveraged buyout (LBO) firms, before they concluded that advertising their enthusiasm for borrowing was bad for their reputations, getting them called Barbarians and worse. Private-equity firms were supposed to be different from LBO firms. They try to use the best LBO techniques for improving the performance of the firms they buy, but without saddling those firms with the massive debt burdens that were to prove so disastrous for RJR Nabisco and many other acquisitions made after the 1980s' LBO boom turned to bust. A study by Steven Kaplan and Jeremy Stein of the buy-outs executed at the boom's peak (1987-88) found that around one-third went bust or needed restructuring by 1991. As Messrs Burrough and Helyar recount, firms such as RJR Nabisco suffered long-term damage to their brand and market share due to aggressive cost-cutting that was driven by the need to pay off debt and interest.

This time was supposed to be different. Yet, as Mr Forstmann tells the two authors, “the so-called junk-bond excesses of the 1980s were minor league compared to what's been going on in credit markets in the last five years or so.” Already there are signs that the easy credit available until the summer of 2007 proved too tempting to some private-equity firms. So far this year, at least 32 significant private-equity-backed firms have gone bust, according to Ed Altman of New York University's Stern School.

The main saving grace is the “covenant lite” debt that private-equity firms used this time to make their acquisitions, which has made it much harder for lenders to force firms into bankruptcy when they fail to meet their payments. As Hamilton James, the chief executive of Blackstone Group, a firm that has arguably surpassed KKR in the private-equity firmament, argued earlier this year, "covenant-lite debt structures are not only in private equity's interest, they're in everyone's interest. The only one you might argue is not better off is the senior secured. By keeping the company intact, the private-equity owners are able to fix the problems, and by preserving the employees, the customers and the business, society at large benefits.”

True enough. On the other hand, covenants-lite will mean bigger losses for lenders, which may ultimately hit the private-equity-owned firms, as they will lead to tighter lending conditions and thus to slower economic growth.

Still, the head of one big private-equity firm was bullish this week, telling The Economist that “losses by private-equity this time around will disappoint the prophets of doom.” Indeed, he points out that many big private-equity firms have plenty of equity—raised before the credit crunch—and unused lines of credit from banks. Thus, they are well placed to make huge returns by buying assets at the bottom of the cycle, just as they have done in past downturns.

The new chapter ends with two thoughts. First, given how today's private-equity industry seems “eerily reminiscent” of the early 1990s, post-RJR Nabisco hangover: “Does anyone on Wall Street ever really learn anything?” Well, we shall see. Second, asserted with more certainty: “Be assured, however, that the Barbarians are out there just beyond the gate, licking their wounds, biding their time, waiting for their next chance to storm the gates.” Indeed, while all eyes are on the financial market meltdown, the gates may already be opening.

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