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
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.
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.
To buy a majority of the shares, strategically increase share valuation, and sell the company at a huge profit to the raider.
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
A raider looks at maximising his personal interests rather than the interests of the company.
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.
Most raiders are ostensible takeovers that sometimes damage the image of the company, because of the way they are conducted.
Corporate raiders could result in distress and despair among employees of the organisation, especially experienced top executives who could end up losing their jobs.
