FROM THE VAULT: ERA OF GREED—MARCH 11, 1985

Forbes - - CONTENTS -

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.

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