Corporate raid
In business, a corporate raid is the process of buying a large stake in a corporation and then using shareholder voting rights to require the company to undertake novel measures designed to increase the share value, generally in opposition to the desires and practices of the corporation's current management. The measures might include replacing top executives, downsizing operations, or liquidating the company.
Corporate raids were particularly common between the 1970s and the 1990s in the United States. By the end of the 1980s, management of many large
History
History of private equity and venture capital |
---|
Early history |
(origins of modern private equity) |
The 1980s |
(leveraged buyout boom) |
The 1990s |
(leveraged buyout and the venture capital bubble) |
The 2000s |
(dot-com bubble to the credit crunch) |
The 2010s |
(expansion) |
The 2020s |
(COVID-19 recession) |
Corporate raids became a hallmark of investors in the 1970s and 1980s, particularly highlighted by the public suicide of
Icahn also attempted the grand prize of U.S. Steel, launching a hostile takeover for 89% of the industrial giant for $7 billion ($19.5 billion today) in late 1986 and only being rebuffed finally by CEO David Roderick on January 8, 1987.[5]
T. Boone Pickens' hostile takeover bid of Gulf Oil in 1984 led to shock that such a large company could be raided. Gulf eventually sold out to Chevron for a then-record $13.3 billion ($39 billion today) "white knight" buyout.
Paul Bilzerian launched a number of takeover bids including Cluett Peabody & Company, Hammermill Paper Company, Pay n Pack Stores, Allied Stores and the Singer Corporation. All of his takeover bids were for all cash and for all shares and he refused any greenmail. Bilzerian was indicted for Schedule 13(d) disclosure violations and despite his claims of innocence he was convicted in 1989. After spending thirty years fighting the government in his attempt to overturn his conviction, he renounced his US citizenship in 2019.
British raider Beazer also launched several successful hostile takeovers in the 1980s, the largest being that of Koppers in early 1988 for $1.81 billion ($4.9 billion today).[6]
Many of the corporate raiders of the 1980s were onetime clients of Michael Milken, whose investment banking firm, Drexel Burnham Lambert helped raise blind pools of capital which corporate raiders could use to make legitimate attempts to take over companies and provide high-yield debt financing of the buyouts.
Ronald Perelman and Revlon
Drexel Burnham raised a $100 million blind pool in 1984 for
In 1985, Milken raised $750 million for a similar blind pool for
Decline of the corporate raiders
This section possibly contains original research. (February 2023) |
In the late 1980s several famous corporate raiders suffered from bad investments financed by large amounts of
Media reflections of corporate raiders
Although private equity rarely received a thorough treatment in popular culture, several films did feature stereotypical "corporate raiders" prominently. Among the most notable examples of private equity featured in motion pictures included:
- Gordon Gekko, Sir James Goldsmithalso appears in Wall Street.
- Larry the Liquidator, Other People's Money (1990) – A self-absorbed corporate raider "Larry the Liquidator" (Danny DeVito), sets his sights on New England Wire and Cable, a small-town business run by family patriarch (Gregory Peck) who is principally interested in protecting his employees and the town. Larry ultimately wins over the shareholders when he admits he did not cause the company to fail; rather it was making outmoded equipment, using the analogy of 19th Century buggy whip makers who failed to realize they were being superseded by the automobile.
- Edward Lewis, Pretty Woman (1990) – Corporate raider Edward Lewis (Richard Gere) attempts to make a hostile takeover of Morse Industries. Edward explains what he does for a living to Vivian (Julia Roberts): he buys large companies that are on the verge of bankruptcy, breaks them up and sells them in smaller parts, at a price that's more than the whole company, for profit.
- That Guy, Mom's ruthless robot manufacturing company. The character resembles that of Gordon Gecko from Wall Street.
- Devin Weston, venture capitalist. In reality, he is a corporate raider who finds loopholes in legal contracts that he uses to strip companies of their assetssimply because he can, and because he enjoys knowing that his victims can do nothing to stop him. Over the course of the game, he attempts to force the Richards Majestic film studio into bankruptcy by sabotaging production of a major film, leaving the owners with no choice but to sell their stake in the company to him. Once he has a majority shareholding (and after collecting the insurance on the film), he plans to tear the studios down and build luxury apartments in their place. The player is able to prevent this from happening by retrieving the film stolen by Weston, but this causes Weston to harbour a grudge against the player character, and he becomes one of the primary antagonists of the game. If the player chooses Ending C, Weston is killed along with the other three antagonists.
References
- ^ Trehan, R. (2006). The History Of Leveraged Buyouts. December 4, 2006. Accessed May 22, 2008
- ^ "Sharon Steel files under Chapter 11". Lakeland Ledger. Associated Press. April 18, 1987. Retrieved May 4, 2014.
- ^ "10 Questions for Carl Icahn" by Barbara Kiviat, Time, February 15, 2007
- ^ TWA – Death Of A Legend Archived November 21, 2008, at the Wayback Machine by Elaine X. Grant, St. Louis Magazine, October 2005
- ^ Icahn drops bid to acquire USX
- ISSN 0362-4331. Retrieved January 29, 2021.
- ISBN 0-671-61780-X.
- ISBN 0-7871-1033-7.
- ^ Stevenson, Richard (November 5, 1985), "Pantry Pride Control of Revlon Board Seen Near", The New York Times, p. D5, retrieved April 27, 2007
- ^ Hagedom, Ann (March 9, 1987), "Possible Revlon Buyout May Be Sign of a Bigger Perelman Move in Works", The Wall Street Journal, p. 1.
- ^ Gale Group (March 8, 2005), "Revlon Reports First Profitable Quarter in Six Years", Business Wire, retrieved February 7, 2007[permanent dead link].
- ^ Timberlake, Cotten & Chandra, Shobhana (March 8, 2005), "Revlon profit first in more than 6 years", USA Today, retrieved March 20, 2007.
- ^ "MacAndrews & Forbes Holdings Inc.", Funding Universe, retrieved May 16, 2008
- ^ The Icahn Lift: 60 Minutes' Lesley Stahl Profiles The Billionaire Investor Archived May 26, 2008, at the Wayback Machine, 60 Minutes, March 9, 2008.
Further reading
- Wayne, Leslie (January 4, 1988), "Takeovers Revert to the Old Mode", The New York Times.