There has been extensive media coverage on the resurgence of leveraged buyouts (LBO’s), including a recent cover story, “The Buyout Binge” in the April issue of “CFO Magazine.” Nine of the top ten LBO’s were recent, and then there was the 1988 acquisition of RJR Nabisco by Kohlberg Kravis Roberts. I showed a segment of the movie “Barbarians at the Gate” to my NYU finance class, and also highly recommend the book. The RJR Nabisco deal highlights the importance that understanding business fundamentals plays in any business deal. Henry Kravis knew he needed a better understanding of RJR Nabisco’s core operations so he could price his bid accurately and compete with the insider buyout bid by CEO Ross Johnson. This made Kravis dependent on RJR Nabisco executives such as John Greeniaus, CEO of Nabisco, for their cooperation. Despite Ross Johnson’s entreaty, “Johnny, I’m going to make you rich!” Greeniaus eventually did share valuable insights with the KKR team. Hopefully dealmakers are not losing sight of business fundamentals in today’s overheated LBO market. The year after the RJR Nabisco deal the market dropped 200 points (a lot in 1989) due to the failure of Robert Campeau’s US retail operations, and the unraveling of a $6.8 billion buyout of United Airlines. Nobody wants to see a similar market meltdown resulting from the most recent crop of LBO’s.