Barbarians at the Gate :: Business Management Studies

Barbarians at the Gate Barbarians at the Gate is a story of the largest takeover in Wall Street history. Ross Johnson turned CEO of a play along, which was the produce of three merged companies, Standard Brands, RJ Reynolds, and National Biscuit Company (Nabisco). The newly formed companys, called RJR Nabisco, stock began to fall and never recover. Johnson along with Shearson executives planned a leverage buy bring out (LBO), in which a brokerage firm (Shearson) would borrow money from banks and buy up all the outstanding shares from the stockholders to turn the company private. The problem with this is that the company would be put into jeopardy of other companies that can outbid the parent company, which would lead to a takeover. The higher the bid would lead to a bigger debt and lesser profits for the owners of the firm. One of the six accounting patterns that was discussed in the book was the expense principle, which helps determine performance of a company by measur ing the outflows and inflows of resources. The matching principle guides the recognition of expenses, so good matching will ultimately lead to a better measure of performance. When KKR exercised due diligence of RJR Reynolds, they could not figure out other uses of cash in the statements obtained. The initial projections they had obtained from RJR Nabisco was a heading other uses of cash. Beside it was a row of figures stretching out ten years, each year ranging from ccc to 500 million dollars. Was it cash flowing in or out? Should he add it? Subtract it? Ignore it? (Barbarians 369).