Raider

Reviewed by Athena | Updated on Sep 28, 2020

Introduction

A raider or corporate raider is an investor who takes control of a company by buying a large stake in it. By the time of acquiring the majority of the shareholders’ voting rights, the corporate raider pushes for a change in the restructuring of the company, especially the top management. The goal of a corporate raid is to influence the decision-making process of the company, increase profitability, and value to shareholders, and in some cases, liquidate or sell the company at a profit.

Raiders target companies that are failing and having undervalued assets. While the key aspect is to bring about a profitable change in the company, there could be a personal aspect involved as well, for the raider.

Advantages of a Corporate Raid

  1. A raider could affect a corporate raid if he feels that a company’s assets are being undervalued, and could be used to generate profits effectively.

  2. A corporate raid could be carried out to effect strategic restructuring and managerial changes, in order to improve the reputation of the company, which in turn impacts its share price and net worth.

  3. To buy a majority of the shares, strategically increase share valuation, and sell the company at a huge profit to the raider.

  4. To form a corporate synergy in areas of similar products and interests, in order to benefit from the economies of scale.

Disadvantages of a Corporate Raider

  1. A raider looks at maximising his personal interests rather than the interests of the company.

  2. The benefits of a corporate raider are most often short-term, as the raider looks at making a profit quickly and in the near future.

  3. Most raiders are ostensible takeovers that sometimes damage the image of the company, because of the way they are conducted.

  4. Corporate raiders could result in distress and despair among employees of the organisation, especially experienced top executives who could end up losing their jobs.

Related Terms

  • Statutory Audit

    A statutory audit is a legally required check of the accuracy of the financial statements and records of a company or government.   Read more


  • Gross Working Capital

    Gross working capital refers to the total current assets of a company.   Read more


  • Deferred Revenue

    Deferred revenue, also called unearned revenue, applies to advance payments obtained by a company for goods or services that are to be provided or performed in the future.   Read more


  • Operating Revenue

    Operating revenue refers to the revenue generated by a company from its primary activities.   Read more


  • Escalator Clause

    An escalator clause is also known as an escalation clause, where the provision allows for an automatic increase in the wages or prices.   Read more


  • Agency Problem

    The agency problem is a scenario of a conflict of interest which is inherent in all relations wherein one party is anticipated to operate in the best interests of another party.   Read more


Recent Terms

  • Amortisation

    Amortisation is an accounting strategy used to regularly reduce a loan's book value or an intangible asset's book value over a given period of time.   Read more


  • Rationalisation

    The reorganisation of a firm with the view of enhancing the efficiency of the operation is referred to as the rationalisation.   Read more


  • Profit Centre

    A profit centre refers to a branch, unit, or division of a company which directly adds or which normally adds to the bottom-line or profits of the company as a whole.   Read more


  • Authorised Share Capital

    Authorised share capital is the number of stock units (shares) that a company may issue, as set out in its association memorandum or incorporation papers.   Read more