Part I — The story
The story
Henry Kravis, with his cousin George Roberts and Jerome Kohlberg, co-founded KKR in 1976 and pioneered the leveraged buyout (LBO) — acquiring companies using large amounts of borrowed money, improving or restructuring them, and selling at a profit. The technique used debt to amplify returns and allowed relatively small firms to take over very large companies, reshaping corporate ownership and spawning the modern private-equity industry.
KKR's defining moment was the $25 billion takeover of RJR Nabisco in 1988 — then the largest buyout in history, immortalised in the book Barbarians at the Gate as the symbol of the leveraged-buyout era's ambition and excess. Kravis built KKR into one of the world's great investment firms. He is a study in financial engineering — using leverage to amplify returns and reach — in the discipline of improving acquired companies, and in the power, and the controversy, of the private-equity model he helped create.
Part II — The playbook
The playbook
Use leverage to amplify
Kravis used borrowed money to magnify returns and reach far larger targets.
Improve what you acquire
KKR's returns came from restructuring and improving companies, not just financing.
Think bigger than your size allows
LBOs let a small firm take over giant companies.
In their words
If you don't have integrity, you have nothing.
Any time there is change, there is opportunity.
Don't congratulate us when we buy a company — congratulate us when we sell it, because any fool can overpay.
What to read next
- Barbarians at the Gate — Burrough & Helyar
Why this matters
The thinking behind these decisions connects to models you can study directly:
Frequently asked questions
What is a leveraged buyout?
Acquiring a company using large amounts of borrowed money, improving or restructuring it, then selling at a profit — the technique Henry Kravis's KKR pioneered, using debt to amplify returns and let small firms take over giant companies.
What was the RJR Nabisco deal?
KKR's $25 billion takeover of RJR Nabisco in 1988 — then the largest buyout in history, immortalised in Barbarians at the Gate as the symbol of the leveraged-buyout era's ambition and excess.