Corporate raiders, or activist investors, aim to increase shareholder value, often through aggressive tactics such as seeking seats on a company’s board of directors or interfering with management plans. They typically have access to large sums of money and may rally investor support for proxy fights with executives.
Corporate raiders, who can also be called activist investors, seek to maximize shareholder value for investors. An attacker’s personal interest is usually involved, as this investor may attempt to generate considerable profits in the process, often to the disdain of corporate executives. Activist investors generally comply with any regulations in place in a region, and subsequently, targets of activist investor activities are often forced to fight back with financial and other available resources.
Any aggressive activity by corporate attackers must usually be preceded by an activist investor taking an equity stake in a target company. To begin to influence the direction of a business, investors must own a minimum equity interest in that company based on regional laws. As activist investors increase ownership of a stock, buying activity is documented in regulatory records, so the public can theoretically recognize when some activist activity is brewing.
Investors deemed corporate raiders typically have access to large sums of money. Some of these people manage assets for clients. The investment firm’s strategy, like a hedge fund, might be to identify companies that don’t appear to be generating potential earnings for the stock and try to turn that business around to the benefit of clients and the activist investor.
A common strategy is to seek seats on a company’s board of directors, which gives corporate raiders a voice at major company events. This strategy is not always successful, as in order to gain a seat on a company’s board, investors need to gain shareholder approval. Corporate attackers often go to great lengths using different means of communication, such as the media, to communicate to shareholders why a change is necessary.
The desires of corporate attackers often stand in stark contrast to the direction in which corporate executives seek to do business. This is largely the catalyst for the contempt that often exists between parties. A common strategy for corporate attackers is to step in and try to interfere with a plan disclosed by management, such as a merger or acquisition. One strategy could be the activist investor himself submitting an offer to buy the business that shareholders cannot refuse.
One way activist investors step in could be to rally investor support for a proxy fight with company executives. A company merger can have all the merits in the world, but it needs shareholder support to become a reality. If enough shareholders support a corporate raider who opposes a merger, those individuals will not vote in support of the deal, which could prevent the transaction from taking place and ensure the success of the activist investor.
Asset Smart.
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