The Corporate Raider: Pillager or White Knight in Disguise?

The corporate raider is an individual that sometimes plays a vital role in a company's future. Many have different opinions as to what corporate raiders actually provide. A corporate raider is an individual that seeks to pursue a corporate takeover. The corporate raider will identify a company that appears to be undervalued in the market place. Then, they come in and buy a large number of shares in the corporation. At that point, the corporate raider will have a great deal of control over the company because of the massive voting rights that they have. Here are the basics of what a corporate raider is and what they do.

Creating Change

Once the corporate raider has taken over, they attempt to institute positive change in the company. They can do this through a number of different tactics and strategies. However, once they change the culture or structure of the company, the price of the company stock will typically go up. At that point, the corporate raider stands to make a substantial amount of money because of the large number of shares that they have in the company.

Board Changes

One common tactic that corporate raiders use is to call for significant changes to the Board of Directors of a company. They might come in and demand that the entire board be changed. They will ask for this change and then vote for it with their significant voting rights. They can then recommend people that would be more willing to work with them.

Going Private

Some corporate raiders have also been known to take their companies private once they take over. This is done by buying out all of the outstanding shares in the market place. This strategy gives the raider more control over the company. Since the company is no longer a public company, they can also take advantage of certain tax advantages under the S corporation structure.

Influence

The influence that a corporate raider has on a corporation could be considered positive or negative, depending on who you ask. If you are part of the existing company, you may not like the idea of someone coming in and taking over. However, if you are a shareholder in the company, you will generally like corporate raiders. They will bump up the share price of the stock and potentially offer to buy your shares at a premium. Many times, the company is better off because of the presence of the corporate raider.

Trying to Stop Raiders

Companies that fear a hostile takeover will often use tactics in order to stop corporate raiders. For example, they might use a shareholders rights plan, increase the amount of debt on the books, or attempt to buy back shares from the raider.

Perhaps the most popular example of a corporate raider is Carl Icahn. He used a variety of tactics in corporate takeovers in order to make a substantial amount of money over the years. Corporate raiders are both good and bad, depending on where you stand and what your needs are for the company.

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