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Now investors are watching carefully for signs of weakness in the ultimate deal: the 1988 buyout of RJR Nabisco, which Kohlberg Kravis Roberts, headed by Henry Kravis, acquired for $25 billion. The battle for RJR combined all the excesses of the era, pitting Milken and Kravis against Cohen and F. Ross Johnson, the RJR chairman who stood to make more than $100 million by winning the fight. The victorious Kravis walked off with $75 million in fees alone as part of his prize.
While titans tangled for the last of the megadeals, the ranks of their troops were shrinking drastically in the last years of the '80s. Merrill Lynch, which lost $213 million in 1989, last month announced plans to let 3,000 of its 41,000 employees go by the end of this year. The bleak job outlook deters business-school students who a few years ago might have eagerly aspired to investment-banking jobs. "A lot of people are shying away from Wall Street because the jobs are not there," says Mike Russell, 25, editor of the Harvard Business School newspaper. "There is an air of uncertainty about the Street. People aren't convinced of the financial returns and are worried about job security."
The new hot-job category for many students is "turnaround consulting," which develops the skills to rescue troubled companies -- including overleveraged firms that have been through the takeover wars. The new heroes are turnaround specialists like Sanford Sigoloff. Long known as Ming the Merciless for his fierce cost cutting, Sigoloff now runs the bankrupt U.S. operations of Australia-based Hooker Corp., which loaded up on debt to acquire the B. Altman and Bonwit Teller department-store chains.
Not to be outdone, Wall Street's investment bankers are lining up for their share of the money to be made from the wreckage of the '80s. Observes Robert Reich, professor of political economy and management at Harvard's Kennedy School of Government: "Much of the impetus behind the leveraged buyouts was to bust up companies that were frantically put together in the '70s. Many times it was the same investment bankers and lawyers who then proceeded to take them apart in the '80s. In the '90s these same teams will work on reducing debt loads to strengthen core businesses."
The takeover fevers that racked the '80s have already begun to abate. The total number of U.S. mergers and acquisitions plunged 14% last year, to 3,412 deals, and is now declining at a brisker rate. Only 165 transactions were completed last month, down 56% from January 1989. "The big-fee merger and acquisition game is pretty much over," says Donald Ratajczak, director of the Economic Forecasting Center at Georgia State University. "There are still going to be deals, but nothing like we saw in the '80s."
A prime reason is the severely depressed state of the junk-bond market, where shell-shocked investors are wary of buying new issues. Of nearly $300 million in bonds that were scheduled to be sold this month, virtually every offering has been canceled or postponed. Without the ability to tap the junk market, would-be raiders will no longer be able to take aim at substantial targets.