Corporate Raiders: History, Methods, and Impact

Corporate raiders have a long history dating back to the 19th century, with notable examples including Jay Gould's takeover of the Buffalo and Erie Railroad in 1868.

Gould's tactics involved buying up shares of the railroad and then using his influence to elect his own board of directors. This allowed him to gain control of the company and make significant changes, including a major merger.

The methods used by corporate raiders have evolved over time, but one thing remains the same: their goal is to gain control of a company and make a profit, often at the expense of the company's existing management and shareholders.

One of the most infamous corporate raiders of all time is Carl Icahn, who made his fortune in the 1980s by taking over companies like TWA and Phillips Petroleum.

Discover more: Raiders Game Delayed Today

A raider is an investor that seeks to squeeze out a quick profit from failing and undervalued companies.

They typically buy big enough stakes in these companies to give them significant voting rights, which allows them to take control of the decision-making process.

With their influence, they can make changes to the company's structure or operations to increase shareholder value, such as replacing top executives or restructuring the company.

In fact, corporate raiders often use their voting rights to remove or replace the board of directors to suit their needs.

Their ultimate goal is to sell the company or its assets at a higher price than they bought them for, resulting in substantial profits.

Corporate raiders often target small to failing firms with the intention of expanding them and increasing the value of their shares.

They may use various tactics to achieve this, including purchasing outstanding shares under the pretense of increasing the company's development and growth.

Additional reading: A Corporate Financial Manager Trying to Maximize Shareholder Value

Managers and members of the board often oppose corporate raiding because they want a system of management where their actions aren't altered for the goals of a single individual or group.

They fear that corporate raiders will engage in practices that don't serve the best interest of the firm or other shareholders. Many companies have employed tactics to prevent corporate raiding, including shareholders rights plans.

These plans can be used to prevent a takeover by making it difficult for an individual or group to acquire a majority of shares. Some companies have also implemented supermajority voting, where the vote is based on numbers and not the shares value owned by each shareholder.

This makes it harder for a corporate raider to gain control of the company. Companies have also used staggered boards of directors, which can prevent a corporate raider from quickly gaining control of the board.

Another tactic is to buy back shares from raiders at a higher price, as stated in a contract before selling shares to suspected raiders. This can make the company less desirable to potential acquiring companies and buyers.

Corporate raiders have a long history in the United States, dating back to the 1970s. They were particularly common during this time before publicly traded corporations adopted takeover defenses.

Raiders became famous for buying companies and dismembering them, securing a tidy profit while leaving many workers unemployed. Nowadays, raiders, or activist investors, have sought to clean up their reputation by engaging in different tactics.

In 2020, raiders launched 173 separate campaigns for an aggregate value of capital deployed of $39.5 billion. Proponents argue that they make capital markets more efficient by improving companies that are failing.

Three veteran corporate raiders who still hit the headlines are Nelson Peltz, Carl Icahn, and Kirk Kerkorian. Nelson Peltz is worth $1.4bn and has made a fortune through a series of acquisitions and sales of companies.

Here are some key facts about these corporate raiders:

Ronald Perelman and Revlon are a notable example of a corporate raider in action. Ronald Perelman raised a $750 million blind pool in 1985, which he used to acquire Revlon Corporation in 1986. This takeover was notable for its high debt load, which burdened the company.

Perelman's strategy involved acquiring Revlon through his holding company MacAndrews & Forbes, which he used as a vehicle for subsequent leveraged buyouts. He initially made a bid for Revlon at $47.50 per share, but eventually increased it to $53.00 per share.

The takeover was a success, valuing Revlon at $2.7 billion. However, it was also troubled by a heavy debt load, which led to the sale of several divisions. Revlon sold 4 divisions, including two for $1 billion and its vision care division for $574 million.

Here's a breakdown of the key players and their roles in the Revlon takeover:

Perelman's takeover of Revlon was a significant event in the history of corporate raiders. It highlighted the use of blind pools and leveraged buyouts to acquire companies, and the potential risks and consequences of such strategies.

The Version History section of the game's documentation is a treasure trove of information on the changes made to the game over time.

One of the notable changes was the re-animation of most Cog animations from Toontown Online for every Cog body type. This update brought a fresh new look to the game's Cogs.

The game's Cogs and Skelecogs were also given a visual makeover, with new high-quality models that fixed many visual issues and brought their visual quality up to par with modern standards.

A list of the new high-quality models includes:

Tweaks were also made to the attack damage, accuracy, and frequencies of various Cog types, including Downsizer, Corporate Raider, The Swindler, Toxic Manager, Magnate, Number Cruncher, and Legal Eagle Cogs. These changes helped smooth out their progression as their levels increase.

For example, Corporate Raider's lowest damage was increased from 6 to 7, and its Canned attack damage range was increased from 6-14 to 8-16.

Additional reading: Watch Tomb Raider

The rise and fall of corporate raiders was a wild ride, and it's fascinating to look back on how they impacted the business world.

Many corporate raiders suffered from bad investments financed by large amounts of leverage, ultimately losing money for their investors.

The fall of Michael Milken and the collapse of Drexel Burnham Lambert in the late 1980s cut off the credit lines for these investors, making it harder for them to finance their deals.

By the end of the 1980s, many large publicly traded corporations were taking drastic defensive measures to prevent hostile takeovers, including poison pills and golden parachutes.

The overall price of the American stock market increased in the 1990s, reducing the number of situations in which a company's share price was low with respect to its assets.

As a result, the corporate raider moniker was used less frequently by the end of the 1990s, and many of these individuals were re-characterized as "activist shareholders" who pursued different tactics.