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Kohlberg Kravis Roberts & Co. helped develop the acquisition concept known as the leveraged buyout (LBO) by creating a series of limited partnerships to acquire various corporations, ones they judged were performing well below their sales and profit potential. In most cases, Kohlberg Kravis Roberts & Co. put up ten percent of the acquisition price from its own funds and borrowed the rest from investors by issuing high-yield bonds. In the 1980s, these high-yield bonds, which were also high risk, became known as "junk bonds." Investment bankers such as Drexel Burnham Lambert, led by Michael Milken, raised enormous amounts of money for leveraged buyouts. Once the targeted company was successfully taken over, Kohlberg Kravis Roberts & Co. then organized a drastic restructuring, selling off selected assets or subsidiaries and implementing a series of cost-cutting measures. The new, "leaner and more efficient" company was then resold, at a huge profit.
In 1987, Jerome Kohlberg, Jr. resigned from the firm, and Henry Kravis succeeded him as senior partner. Under Kravis, the firm was responsible for the 1988 leveraged buyout of RJR Nabisco. At a cost of $24.88 billion, it was the then highest price ever paid for a commercial enterprise. The publicity surrounding the event led to the story being dramatized in the book and film, Barbarians at the Gate. In early 1995, Kohlberg Kravis Roberts & Co. divested its remaining holdings in RJR Nabisco.
The list of companies Kohlberg Kravis Roberts & Co. has bought and sold over the years includes many of the great American brand names such as Texaco, Gillette, Playtex, Beatrice, Safeway, Borden, and Samsonite.