1950s Thomas Boone Pickens worked as a geologist at Phillips, an oil firm based in Bartlesville, Oklahoma. He hated it. His working day was regimented. His colleagues lacked ambition. He found the waste and inefficiency sickening. “At Phillips, I met the monster: Big Oil,” he wrote. Mr Pickens left to form his own firm, Mesa Petroleum. Impatient with its progress, he devised an audacious plan. He would slay the monster by using Mesa to buy out larger, badly managed firms.
Leveraged buyouts were not entirely new. In the 1960s they were used as a way for small, family-owned firms to sell out to managers without the cost of a public listing. But by the early 1980s the financial landscape was changing. Specialist buyout firms were coming to prominence, including Kohlberg Kravis Roberts . Mergers were looked upon more kindly by trustbusters. And debt financing was on tap.
Debt is always good - in the right hands!