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Case Study: Rjr Nabisco

In: Business and Management

Submitted By britton101
Words 1064
Pages 5
Raymond Britton
FIN-660
Case Study: RJR Nabisco
March 22, 2015

The RJR Nabisco Leveraged Buyout (LBO) case study analyzes the history prior to the LBO and the post LBO corporate organization. RJR Nabisco was not performing well prior to the LBO. Financial analysis’s also implies that the shareholders of RJR Nabisco profited from Kohlberg Kravis & Roberts winning LBO bid. (Gaughan). To define a leveraged buyout or LBO, it is “a financial procedure used by a many business entities, including the management of a corporation or outside groups, such as other corporations, partnerships, individuals, or investment groups” (Gaughan). An LBO is the acquisition of another company where borrowed money is used to meet the cost of acquisition. This type of transaction allows firms to have the capability to achieve large acquisitions without obligation of having to disperse a lot of capital. LBO’s make it possible to and provide the ability to obtain less significant firms with very little capital and the attained business can take advantage from the re-organization. Additionally, LBO’s can possibly experience aggressive takeovers to the assimilated firm due to the reorganization and downsizing which can and may have a significant disruptive impact on the acquired firms workforce as well as a conflict of interest between personnel and management. The popularity of tobacco continued into the 1900’s which RJR projected and in 1913 launched four new tobacco products within its portfolio. In the years to come, RJR faced some large challenges and was under pressure from generic brands and stress of the sluggish economy. RJR took steps to differentiate its cigarette lines from other brands; it ramped up production internationally and took a broad approach to educate the public on the risks of smoking cigarettes. These actions made RJR very attractive to potential LBO…...

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