Corporate attackers aim to acquire and dismantle companies to generate profit. They need financial backing and a strategy to identify vulnerable yet desirable targets. Once in control, they sell assets and may close facilities. Success can lead to future attacks. Employee stock ownership plans can prevent takeovers.
Corporate attackers are investors who engage in the act of directing or orchestrating a hostile takeover of a company. Sometimes called a company breaker, the attacker usually goes after a corporation, with the aim of selling off the company’s various assets as a means of generating a huge profit.
To effectively participate in corporate attacks, the attacker must have solid financial backing and a clear strategy on how to go about systematically acquiring and then dismantling a corporation to generate enough revenue to cover the investment and make a profit. This requires the attacker to have a fine-grained sense of which companies are in a vulnerable enough position to allow a gradual takeover, but still have enough stability and assets to be a desirable target. This usually means that the company will have a fair amount of liquid assets or available assets, but may be experiencing a drop in share price for some reason. The corporate attacker’s ability to come in and buy enough shares to gain control is crucial to the project’s success.
Once the attacker has a controlling stake in a company, it is usually a relatively easy process to convince other shareholders to go along with the company’s bankruptcy process or to buy out the remaining shareholders. At that point, all obstacles to asset sales are removed and the corporate attacker can begin to divest land, equipment, buildings, and any other assets that need to be converted into cash. In some cases, this means the closure of production facilities and the end of company operations. At other times, the corporate attacker may strip the company of many assets but leave a shell that is still capable of operating, albeit on a much smaller scale. The remaining operation and related facilities can be sold, completing the process of breaking up the company.
The successful corporate attacker can easily recoup all the expenses involved in acquiring control of the company and still make a considerable profit for the time and effort. For the people who make a living from this camp, a portion of the profit is pumped back into operating capital that will be needed to fund future attacks.
During the 1980s and 1990s, conditions were often ideal for the corporate attacker to reap huge profits from their efforts. However, not all attempts were successful. In some cases, a company can avoid a hostile takeover by converting shares into employee stock ownership plans and placing the company in the hands of a holding company created to oversee the process. This put the corporate attacker in a position where he or she had to either agree to the change or lose money on the public stock that had been held up to the time of the conversion to the ESOP.
Asset Smart.
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