FROM THE VAULT: ERA OF GREED—MARCH 11, 1985
A look back at the buyout boom, Carl Icahn and the period’s hottest new car: the Oldsmobile.
“Is there no place to Hide these days from those ghouls who want to suck some corporate blood?” asked Forbes editor Jim Michaels, introducing our cover story on the boom in blockbuster buyouts. There had been just one billion-dollar transaction in 1980: Seagram’s sale of Sun Co. to Texas Pacific. In 1984 Wall Street put together 17 ten-figure deals, capped by Chevron’s $13.3 billion takeover of Gulf Oil (roughly $32 billion in 2018 money).
Fueling the frenzy: bank deregulation, undervalued assets, antitrust leniency and companies newly flush with cash thanks to 1981 tax-break legislation. Most important, perhaps, Wall Street was now lined with financiers experienced in handling these mega-acquisitions—firms such as Drexel Burnham Lambert and Salomon Brothers. “People have learned to do things quickly,” observed Charles Nathan, a Merrill Lynch executive. “It used to take weeks to line up bank commitments. Now it can be done in just a few days.”
Before long, the bankers and raiders would be the ones wearing masks of anguish. The go-go decade’s highwater mark came in 1988, when bankers managed nearly $100 billion (over $200 billion today) in leveraged buyouts. But the number of LBOs would fall by nearly 60% the following year in the wake of a soft stock market and increased regulatory pressure.