¹ See Baker, George and Smith, George, The New Financial Capitalists: Kohlberg Kravis Roberts and the Creation of Corporate Value (New York, 1998)CrossRefGoogle Scholar; Kaufman, Allen and Englander, Ernest J., “Kohlberg Kravis Roberts & Co. and the Restructuring of American Capitalism,” Business History Review 67, no. 1 (1993): 52–97CrossRefGoogle Scholar; Wright, Mike, Robbie, Ken, Chiplin, Brian, and Albrighton, Mark, “The Development of an Organisational Innovation: Management Buy-Outs in the U.K., 1980–1997,” Business History 42, no. 4 (2000): 137–84CrossRefGoogle Scholar; Steven Toms, Nick Wilson, and Mike Wright, “The Evolution of Private Equity: Corporate Restructuring in the U.K., c. 1945–2010,” SSRN Working Paper (Sept. 2012).

² See Folkman, Peter, Froud, Julie, Johal, Sukhdev, and Williams, Karel, “Working for Themselves? Capital Market Intermediaries and Present Day Capitalism,” Business History 49, no. 4 (2007): 552–72CrossRefGoogle Scholar; Froud, Julie and Williams, Karel, “Private Equity and the Culture of Value Extraction,” New Political Economy 12, no. 3 (2007): 405–20CrossRefGoogle Scholar. For a critique of this position see Wood, Geoffrey and Wright, Mike, “Wayward Agents, Dominant Elite, or Reflection of Internal Diversity? A Critique of Folkman, Froud, Johal, and Williams on Financialisation and Financial Intermediaries,” Business History 52, no. 7 (2010): 1048–67CrossRefGoogle Scholar.

³ The 1980s takeover wave has been extensively examined in the finance literature. See Baskin, Jonathan Barron and Miranti, Paul J. Jr., A History of Corporate Finance (Cambridge, U.K., 1997), 258–302CrossRefGoogle Scholar; Bengt Holmstrom and Steven N. Kaplan, “Corporate Governance and Merger Activity in the U.S.: Making Sense of the 1980s and 1990s,” NBER Working Paper 8220 (Apr. 2001): doi:10.3386/w8220; Bhagat, Sanjai, Shleifer, Andrei, and Vishny, Robert, “Hostile Takeovers in the 1980s: The Return to Corporate Specialization,” Brookings Papers on Economic Activity: Microeconomics (1990): 1–72Google Scholar; and Jensen, Michael C., “The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems,” Journal of Finance 48, no. 3 (1993): 831–80CrossRefGoogle Scholar.

⁴ See, for example, Skeel, David A. Jr., Debt's Dominion: A History of Bankruptcy Law in America (Princeton, 2001)CrossRefGoogle Scholar; LoPucki, Lynn, Courting Failure: How Competition for Big Cases is Corrupting the Bankruptcy Courts (Ann Arbor, 2005)Google Scholar; Ayotte, Kenneth M. and Skeel, David A. Jr., “An Efficiency-Based Explanation for Current Corporate Reorganization Practice,” University of Chicago Law Review 73, no. 1 (2006): 425–68Google Scholar; LoPucki, Lynn and Doherty, Joseph, “Delaware Bankruptcy: Failure in the Ascendancy,” University of Chicago Law Review 73, no. 4 (2006): 1387–419Google Scholar.

⁵ Holmstrom and Kaplan, “Corporate Governance,” 10–15; Kaplan, Steven N., “The Evolution of U.S. Corporate Governance: We Are All Henry Kravis Now,” Journal of Private Equity 1 (1997): 7–14CrossRefGoogle Scholar.

⁶ Baker and Smith, New Financial Capitalists, 1–43; Altman, Edward, “Global Debt Markets in 2007: New Paradigm or the Great Credit Bubble?” Journal of Applied Corporate Finance 19, no. 3 (2007): 17–31CrossRefGoogle Scholar; Baskin and Miranti, History of Corporate Finance, 292–94; Kaufman and Englander, “Kohlberg Kravis Roberts & Co.,” 78–81; Lazonick, William and O'Sullivan, Mary, “Finance and Industrial Development, Part 1: The United States and the United Kingdom,” Financial History Review 4, no. 1 (1997): 7–29CrossRefGoogle Scholar.

⁷ Taggart, Robert, “The Growth of the ‘Junk’ Bond Market and Its Role in Financing Takeovers,” in Mergers and Acquisitions, ed. Auerbach, Alan J. (Chicago, 1987), 5–24Google Scholar.

⁸ For an introduction to takeover defenses adopted during this period see R. S. Ruback, “An Overview of Takeover Defenses,” in Mergers and Acquisitions, ed. Auerbach, 49–68.

⁹ For an examination of the key events around this period see DeAngelo, Harry, DeAngelo, Linda, and Gilson, Stuart C., “Perceptions and the Politics of Finance: Junk Bonds and the Regulatory Seizure of First Capital Life,” Journal of Financial Economics 41, no. 3 (1996): 475–511CrossRefGoogle Scholar; and Jensen, Michael C., “Corporate Control and the Politics of Finance,” Journal of Applied Corporate Finance 4, no. 2 (1991): 13–33CrossRefGoogle Scholar.

¹⁰ As Altman states, “More than half of the defaults in the 1989–1991 credit market meltdowns were overleveraged LBOs and other HLTs [highly levered transactions]. And most of these failures were ultimately caused by the inability of the sponsors to service or refinance the massive amounts of debt put in place in the mid-to-late 1980s” (“Global Debt Markets in 2007,” 25).

¹¹ Baker and Smith, New Financial Capitalists, 143–44.

¹² Emily Thornton, “What's Bigger than Cisco, Coke or McDonald's?” BusinessWeek, 2 Oct. 2005.

¹³ Geraldine Fabrikant, “Business People: 2 Officials at Rothschild Leaving to Start Firm,” New York Times, 2 Nov. 1988; Nanette Byrnes, “Is Wilbur Ross Crazy?” BusinessWeek, 21 Dec. 2003.

¹⁴ Riva Atlas, “A World Where Down Meets Up,” New York Times, 19 Aug. 2005.

¹⁵ Kaufman and Englander, “Kohlberg Kravis Roberts & Co.,” 64–65; Baker and Smith, New Financial Capitalists, 79–80; Lerner, Josh, Schoar, Antoinette, and Wong, Wan, “Smart Institutions, Foolish Choices? The Limited Partner Performance Puzzle,” Journal of Finance 62, no. 2 (2007): 731–64CrossRefGoogle Scholar; Josh Lerner, Antoinette Schoar, and Jialan Wang, “Secrets of the Academy: The Drivers of University Endowment Success,” NBER Working Paper 14341 (Sept. 2008).

¹⁶ See Gilson, Stuart C., Creating Value through Corporate Restructuring: Case Studies in Bankruptcies, Buyouts, and Breakups (New York, 2001)Google Scholar; Andrade, Gregor and Kaplan, Steven N., “How Costly Is Financial (not Economic) Distress? Evidence from Highly Leveraged Transactions that Became Distressed,” Journal of Finance 53, no. 5 (1998): 1443–93CrossRefGoogle Scholar. Gilson provides comprehensive analysis of thirteen cases of corporate restructuring between 1992 and 2000, including the Loewen Group, National Convenience Stores, Continental Airlines, Flagstar Companies, and Alphatec Electronics. Andrade and Kaplan examine thirty-one highly levered transactions of the 1980s.

¹⁷ Michael C. Jensen described the exchange offer and out-of-court settlement as the “privatization of bankruptcy”—a preference for restructuring outside a formal bankruptcy process (e.g., Chapter 11) at a cost lower than using the courts. See Jensen, “Corporate Control,” 24–25. See also Gilson, Stuart C., “Coming Through in a Crisis: How Chapter 11 and the Debt Restructuring Industry Are Helping to Revive the U.S. Economy,” Journal of Applied Corporate Finance 24, no. 4 (2012): 23–35CrossRefGoogle Scholar.

¹⁸ See, for example, Gilson, Creating Value; and Gilson, Stuart C., Hotchkiss, Edith S., and Ruback, Richard S., “Valuation of Bankrupt Firms,” Review of Financial Studies 13, no. 1 (2000): 43–74CrossRefGoogle Scholar.

¹⁹ See Japonica Partners, “Allegheny International: $690 Million Reorganization of Fortune 200 Allegheny International,” http://www.japonica.com/jpallegheny.htm, accessed 18 Dec. 2012.

²⁰ Stephanie Strom, “E-II Holdings Wins Fight for Reorganization Plan,” New York Times, 26 May 1993; Baker and Smith, New Financial Capitalists, 124–62.

²¹ See “Loan Portfolios and Structured Credit,” CarVal Investors, http://carvalinvestors.com/asset-classes/loan-portfolios/, accessed 21 Aug. 2012 (updated URL; original URL no longer available).

²² Hotchkiss and Mooradian found that distressed asset firms (“vulture investors”) created value in the public companies they acquired. This included positive abnormal stock returns around the time an investor announced the acquisition of the distressed companies' debt (or equity) and improvement in postrestructuring performance. See Hotchkiss, Edith S. and Mooradian, Robert M., “Vulture Investors and the Market for Control of Distressed Firms,” Journal of Financial Economics 43, no. 3 (1997): 401–32CrossRefGoogle Scholar.

²³ See Radelet, Steven and Sachs, Jeffrey, “The East Asian Financial Crisis: Diagnosis, Remedies, Prospects,” Brookings Papers on Economic Activity 29, no. 1 (1998): 1–90CrossRefGoogle Scholar; Claessens, Stijn, Djankov, Simeon, and Mody, Ashoka, eds., The Resolution of Financial Distress: An International Perspective on the Design of Bankruptcy Laws (Washington, D.C., 2001)Google Scholar; Sengupta, Rajdeep and Faccio, Mara, “Corporate Response to Distress: Evidence from the Asian Financial Crisis,” Federal Reserve Bank of St. Louis Review 93, no. 2 (2011): 127–54Google Scholar.

²⁴ Claessens, Stijn, Djankov, Simeon, and Klapper, Leora, “Resolution of Corporate Distress in East Asia,” Journal of Empirical Finance 10, nos. 1–2 (2003): 199–216CrossRefGoogle Scholar; Sengupta and Faccio, “Corporate Response to Distress.”

²⁵ “Asia Strategy,” Avenue Capital Group, https://www.avenuecapital.com/strategies.aspx?strategy=Asia%20Strategy, accessed 21 Aug. 2012; Atlas, “A World Where Down Meets Up.”

²⁶ Thornton, “What's Bigger than Cisco.”

²⁷ Shin, Jiyeon and Woo, Wonseok, “An Analysis of Private Equity Funds in Korea and Their Role in the Korean Economy in the Post-Crisis Period,” International Studies Review 9, no. 1 (2008): 47–73Google Scholar.

²⁸ Tett, Gillian, Saving the Sun: Shinsei and the Battle for Japan's Future (London, 2004)Google Scholar.

²⁹ Examples include Asian firms Clearwater Capital Partners (ex-Goldman and ex-Lehman) and ADM Capital (ex-Lehman). Peter Briger, the head of Goldman's Asia distressed business, left to join Fortress where he led Fortress's expansion into Asia.

³⁰ For brief case studies of distressed investments in Regal Cinemas, Vlasic Foods, and Loews Cineplex Entertainment, see Anson, Mark, “A Primer on Distressed Investing,” Journal of Private Equity 5, no. 3 (2002): 6–17CrossRefGoogle Scholar. On Marconi, see “Liar's Poker,” Economist, 15 May 2003.

³¹ Phyllis Berman, “The Life of a Vulture,” Forbes, 30 Sept. 2002.

³² Brett Cole, “Centerbridge Raises $3 Billion for First Buyout Fund,” Bloomberg, 26 Sept. 2006.

³³ Stromberg, Per, “The New Demography of Private Equity,” in Globalization of Alternative Investments Working Papers, vol. 1, The Global Economic Impact of Private Equity Report 2008, ed. Gurung, Anuradha and Lerner, Josh (Geneva, 2008), 3–26Google Scholar; Kaplan, Steven N. and Stromberg, Per, “Leveraged Buyouts and Private Equity,” Journal of Economic Perspectives 23, no. 1 (2009): 121–46CrossRefGoogle Scholar; David T. Robinson and Berk A. Sensory, “Private Equity in the Twenty-First Century: Cash Flows, Performance, and Contract Terms from 1984–2010,” Dice Center Working Paper 2010–021 (Dec. 2010). Developments in the hedge fund industry are examined in Stulz, René M., “Hedge Funds: Past, Present and Future,” Journal of Economic Perspectives 21, no. 2 (2007): 175–94CrossRefGoogle Scholar.

³⁴ For example, Cerberus participated in the restructuring of large corporations such as General Motors and Chrysler during the 2007–2009 crisis.

³⁵ We note a 0.44 correlation between assets under management and total number of offices, and a 0.50 correlation between assets under management and number of employees.

³⁶ See “About Fortress,” Fortress Investment Group, http://www.fortress.com/AboutFortress/Default.aspx, accessed 21 Aug. 2012; Peter Lattman, “Fortress Looks to Diversify,” Wall Street Journal, 17 Feb. 2010.

³⁷ Apollo Global Management, “Apollo Global Management, LLC Reports Second Quarter 2012 Results,” 2 Aug. 2012, http://ir.agm.com/phoenix.zhtml?c=214560&p=irol-newsArticle&ID=1721488; Smita Madhur, “Q&A: Apollo's Moroney Discusses Gulf Stream Acquisition,” Reuters, 15 July 2011; “Apollo Agrees to Acquire Stone Tower, Taminco Group,” Wall Street Journal, 16 Dec. 2011.

³⁸ Oaktree had led the way by listing equity on a Goldman Sachs–managed exchange before moving to the New York Stock Exchange. Private equity firms to “go public” included Blackstone, KKR, and Carlyle. See Gogineni, Sridhar and Megginson, William L., “IPOs and Other Non-Traditional Fund-Raising Methods of Private Equity Firms,” in Private Equity: Fund Types, Risks and Returns, and Regulation, ed. Cumming, Douglas (Hoboken, 2010), 31–51CrossRefGoogle Scholar.

³⁹ In re Chateaugay Corp., 109 B.R.51 (Bankruptcy Court of the Southern District of New York 1990) (known as the LTV case). For analysis see Hershey, Mark A., “Face Value Exchanges, Original Issue Discount, and Elimination of the LTV Risk: In re Chateaugay Paints a Legal Landscape,” Villanova Law Review 38, no. 3 (1993): 801–24Google Scholar.

⁴⁰ See Jensen, “Corporate Control,” 28.

⁴¹ See Baker and Smith, New Financial Capitalists, 41–42, 144; and Jensen, “Corporate Control,” 25.

⁴² Skeel, David A. Jr., “Creditors' Ball: The ‘New’ New Corporate Governance in Chapter 11,” University of Pennsylvania Law Review 152, no. 2 (2003): 817–951CrossRefGoogle Scholar.

⁴³ LoPucki, Lynn and Kalin, Sara, “The Failure of Public Company Bankruptcies in Delaware and New York: Empirical Evidence of a ‘Race to the Bottom,’” Vanderbilt Law Review 54, no. 2 (2001): 231–82Google Scholar; Kenneth M. Ayotte and David A. Skeel Jr., “Why Do Distressed Companies Choose Delaware? An Empirical Analysis of Venue Choice in Bankruptcy,” University of Pennsylvania, Institute for Law and Economics Research Paper No. 03-29 (Oct. 2004).

⁴⁴ Dahiya, Sandeep, John, Kose, Puri, Manju, and Ramirez, Gabriel G., “Debtor-in-Possession Financing and Bankruptcy Resolution: Empirical Evidence,” Journal of Financial Economics 69, no. 1 (2003): 259–80CrossRefGoogle Scholar; Skeel, “Creditors' Ball.”

⁴⁵ See Beranek, William and Jones, Steven L., “The Emerging Market for Trade Claims of Bankrupt Firms,” Financial Management 23, no. 2 (1994): 76–81CrossRefGoogle Scholar; Tashjian, Elizabeth, Lease, Ronald C., and McConnell, John J., “An Empirical Analysis of Prepackaged Bankruptcies,” Journal of Financial Economics 40, no. 1 (1996): 135–62CrossRefGoogle Scholar; Chatterjee, Sris, Dhillon, Upinder S., and Ramirez, Gabriel G., “Resolution of Financial Distress: Debt Restructuring via Chapter 11, Prepackaged Bankruptcies, and Workouts,” Financial Management 25, no. 1 (1996): 5–18CrossRefGoogle Scholar.

⁴⁶ Kaufman and Englander, “Kohlberg Kravis Roberts & Co.,” 64–65, 73–74; Baker and Smith, New Financial Capitalists, 59.

⁴⁷ See Baker and Smith, New Financial Capitalists, 161–62.

⁴⁸ See Gilson, “Coming Through in a Crisis,” 23–25.