"We were charging through the rice paddies, not stopping for anything and taking no prisoners."

This was how Henry R. Kravis once described his 1988 assault on RJR Nabisco, which ranks as the biggest leveraged buy-out in history. And that is how the world still perceives the head of the New York investment firm of Kohlberg Kravis and Roberts (KKR), which is currently believed to be involved in the bidding war for Eircom; Henry Kravis, ultimate corporate raider, master of the hostile deal.

It didn't start out that way. When Henry Kravis formed KKR with Jerome Kohlberg and George Roberts in 1976, the company usually invited management to co-operate in its leveraged buy-outs. The idea was that the owners themselves would get rich, retain nominal control, run the company more efficiently and see the share value go up in time. In practice, solid companies were often broken up and lifelong employees fired to pay the debt incurred in the take-over.

Hostile or not, a buy-out was a money-spinner for the raiders. As an investment bank, KKR received a fee from the company it advised, 20 per cent of profits accrued by the investor group and a management fee of 1 per cent on cash invested. By the early 1980s KKR had singlehandedly transformed the leveraged buy-out into an all- American industry, with many imitators. Success eventually allowed it to choose its targets and to conduct raids independent of management's wishes. The key was the junk bond. Kravis found a soul mate in financiers like Michael Milken of Drexel Burnham Lambert, who leveraged immense financial power through his ability to raise billions overnight through the sale of junk bonds.

Operating from a nondescript office in Manhattan and with a staff of only a few dozen, KKR controlled so many US businesses by the late 1980s that it ranked in the top 10 US corporations. It was practically printing money. Kravis and Roberts - Kohlberg had left by this time - pocketed $60 million (€70 million) each on a deal for Safeway Stores. By 1988, KKR was king of the acquisitors with $45 billion in buying power, more than twice the GNP of the Republic at the time.

An even-tempered but ruthless businessman, with silver hair, blue eyes and a ready smile, Kravis and his fashiondesigner wife, Carolyne Roehm, became the ultimate power couple in Manhattan. They were a fixture at black-tie events, mingling with friends like Donald Trump, he small and dapper at five feet, six inches, his wife in stunning dresses three inches taller. They occupied an antique filled Fifth Avenue apartment with two 1870s Renoirs on the walls. A uniformed servant walked their dog. The gifts he gave his wife were the stuff of legend. Once Carolyne told a friend how she found an emerald necklace under her pillow, which Kravis had bought for her as a present. "And where have you been sleeping?" asked the friend. "In the right bed," she replied.

As speculative hysteria gripped Wall Street, Kravis went for the big one. The epic battle for tobacco and food company RJR Nabisco has been told in the book Barbarians at the Gate by Bryan Burrough and John Helyar.

It started in October 1988 when Ross Johnson, chief executive of RJR Nabisco, put the massive tobacco and consumer products company into play by starting his own buy-out bid with an offer of $75 per share. KKR topped it with a $90 bid, three times as big as anything the firm had attempted before.

As the bidding war escalated, Theodore Forstmann of Forstmann Little, a specialist in leveraged buy-outs also trying to acquire RJR Nabisco, summed up his contempt for junk-bond trading: "The junk-bond hordes are at the city gates," he told the book's authors. "We could stop them . . . push the barbarians back."

But he couldn't. Nor could Ross Johnson's consortium led by Peter Cohen of Shearson Lehman Hutton. KKR ultimately won a dramatic corporate poker game with a staggering bid of $109 a share.

The following year the bubble burst in the bond market. Milken went to jail. Opportunities for leveraged buy-outs dried up. Few chief executives were willing to risk the mauling Johnson took in the press for enriching himself at the expense of a family company.

The unravelling of a buy-out bid for United Airlines nearly caused a market crash. Investors had to inject a further $1.7 billion into RJR Nabisco to stave off a default on the firm's bonds. The $31 billion deal was a bust for big investors, though KKR did not suffer; its accumulated fees totalled $314 million.

In 1995 Kravis divorced Carolyne Roehm. Ever the master of the deal, he held on to most of his $925 million fortune thanks to a cast-iron nuptial agreement. He married MarieJosee Drouin, a Canadian-born economist who this year was voted one of the 12 best-dressed women in the world.

KKR continued to operate as a buy-out and venture capital firm with mixed success. It invested in Russia and turned its attention to Europe. There it had to contend with its image as a brash carrier of barbarian corporate values - everyone had read the book - which were antithetical to European business culture. Demand for junk bonds is still rare in Europe. The firm got off to a shaky start, damaging its reputation initially by backtracking on a 1998 bid for Herberts Paints, a division of the Germany company Hoechst.

"A lot of people don't understand what we do," Kravis complained on a visit to London. "They just assume that we buy a company and bleed it, then either bust it up, or sell it whole and go on to the next one. If that was true, why would KKR have made a £205 million acquisition of Reed Regional Newspapers, sign it in January, then complete an add-on acquisition of Westminster Press for £305 million a few months later?"

In 1999 KKR opened a London office and assembled a $3 billion European buy-out fund, forming a "special" European relationship with Merrill Lynch. It has made six investments in Europe since then, including the purchase of the private networks division of Bosch Telecom and the merger of Wassal PLC of the UK with Austria's Zumtobel AG to form the largest light-fitting business in Europe, with KKR owning 35 per cent.

It still has an estimated $2 billion left, with the potential for more acquisitions.

Recently it tried but failed to acquire Yell, the Yellow Pages section of British Telecom, and last month the company was reported to be considering a bid for the British telecommunications company Cable & Wireless.

In this context, it is hardly surprising that Kravis has been attracted to the bidding war over Eircom.