The Takeover Game

Financial headlines during this decade have been dominated by lurid tales of corporate takeovers and buyouts, such as the Pennzoil-Getty-Texaco courtship. Colorful terms such as “golden parachute,” “greenmail,” and “white knight” have been added to the popular lexicon. The newspaper reader may well be confused by the intricate maneuvers behind the stories; this book can serve as a guide.

Investment banking has been part of the American business scene since 1813, when investment banks sold the bonds that financed the War of 1812. It was the investment bankers who supplied the capital to finance railroad construction in the nineteenth century, opening up the continent for settlement. Mergers have been part of railroad history for a century. The deregulation climate under the Reagan Administration, however, has allowed the formerly staid investment banking firms to undertake new, more aggressive lines of business; today, the biggest part of their income is generated by merger fees. The globalization of business has presented additional opportunities for creative investment banking.

John Brooks is a well-known financial writer, on the staff of THE NEW YORKER for thirty years and author of seven other business books. This project was sponsored by the Twentieth Century Fund for its timeliness. Brooks covers, in addition to investment banking, shelf-registration of securities, trading and arbitrage, leveraged buyouts, and insider trading. He covers the firms and the individual personalities that created these new opportunities, as well as explains how the various kinds of deals are negotiated and financed. While his purpose is not to be judgmental, Brooks does seem to believe that some corporate executives are too willing to be sold a deal and to pay the fees demanded by the investment bankers. He devotes the last chapter to possible changes that would bring about greater fairness in the marketplace.