I realise the source it speaks of is Russian, but I have seen the term applied with respect to Western counterparts as well.
My question is, what is a takeover raid, and how exactly do you go about doing it?
I mean I always picture a bunch of guys in expensive suits with machine guns strapped on thier backs, bursting in through the doubledoors and holding everyone hostage whilst a contract is signed. But I’m figuring that’s not how it’s actually done.
So let’s say you and I (along with a specially selected group - I dubb “The Straight Dope Boyz”) decide we wanna take over a large multinational. How do we stage our takeover raid, and what do we need to consider?
–Oh and in case we forget, we are talking about COMPANIES here, not COUNTRIES or something else. COMPANIES/CORPORATIONS/BUSINESSES etc.
Over a period of several weeks a group of men slowly purchased stock in his company until they held about 2.5% each. If you go over 5% you fall into a special class and it gets noticed. There were several of them and their total ownership came to something like 25% or so.
Then there was an orgy of buying. Buying at any price. Over two or three days the price of the stock ran from about $9.00 up to $30. At the end they owned 51%.
They called a meeting, voted in their own board of directors, fired all the old officers, fired everyone related to my cousins, moved the corporate headquarters to wherever they lived. The price of the stock started to fall and they could buy up a lot of the remaining shares fairly cheaply. Pretty soon the company was no longer publicly traded.
This happens more often in cash rich companies. Essentially once the raiders get control you can use the companies cash to buy back the stock.
Anyway that’s one story.
Don’t feel sorry for the cousins. They are still nuts deep in $100 bills, even if they don’t have a big publically traded company anymore.
No. A hostile takeover is one where the board of directors of the company being acquired is against the purchase. The raider goes directly to the stockholders to get 51% of the stock by paying them more than the going rate. It is done openly – the purchases announces it and then tries to buy up the stock.
Interesting (specially SandyHook’s story). Hey guys, is there any sort of website or book I could get that teaches me more about this stuff? I mean I tried googling but I only got stuff on
a) The government
b) Various companies
But I really wanna learn the ins-and-outs of takeovers (as opposed to mergers) - both hostile and non). Do any books explain this sort of thing from the ground up (for example, different types of takeovers and different examples illustrated)? Where would I start looking?
Is it that you make too many enemies along the way or something so it’s considered bad business?
And are there any groups of people or individuals who do this sort of stuff for fun? I mean they decide to raid different companies and take em over one by one in order to build an corporate empire?
For one, it is very expensive. You are often paying a premium for the stock you purchase and paying out a lot of money to attorneys, accountants, and investment bankers to get it done but not go over the line to do it illegally. On the legal part, the U.S. legal system has checks in place, like the Williams Act, that place limits on how you can make a tender offer, how you can conduct proxy contests, and many other takeover actions (all of which make the efforts to do it cost more because you are constrained by a legal framework that requires you to make onerous disclosures, engage in mailings, etc.).
Then on top of it, you may have spent all of that money for nothing, because certain key individuals won’t sell, the FTC decides not to authorize your acquisition, etc., leaving you with a minority share at a greatly inflated purchase price.
To a degree, but not completely. Making money usually triumphs; it is more the former reasons elaborated. Being known as a corporate raider does make the job harder, however; once you’ve done it, its harder to sneak up on another company by surprise the second time, and they will likely put defenses in place (poison pills, etc.) if they see you coming.
I don’t know about “for fun,” but definately for profit. Many people have discovered a reasonable way of making a living; engage in a hostile takeover of a company that has valuable assets that is being mismanaged (or at least not managed to exploit them fully in the short term sense), fire everyone (or nearly everyone), sell the assets (or portions thereof) for more than you bought the company. It’s simple, but it works.