Back in 1979, I had studied the prospectus for KKR’s eye-popping buyout of Houdaille Industries, one of the first big LBOs. This deal was the Rosetta Stone of buyouts. KKR had put in just 5 percent of the cash to buy Houdaille, an industrial manufacturing conglomerate, and borrowed the rest. Leverage on that scale meant the company could grow at 5 percent, but the equity would grow at 20 to 30 percent. I had been keen to do a similar deal using Lehman’s resources, but I couldn’t muster the internal support. Two years
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