Corporate Raid

Corporate raid is a business term is a particular type of hostile takeover in which the assets of the purchased company are immediately sold off i.e. business liquidation. The target company essentially disappears in the process. Corporate raid means buying a large interest in a corporation and then using voting rights to enact measures directed at increasing the share value. The measures in a corporate raid include replacing top executives, downsizing operations, or liquidating the company. This corporate raid is also referred to as breaking a company.

Corporate raid is considered as a profitable exercise if the company holds disposable assets or liquid investments that are valued higher than the company's current market cap. Some of the examples of this include companies holding valuable land or equipment, while their stock price is too low due to market factors. Corporate raiders are those investors who engage in the act of directed hostile takeover of a company. The corporate raider often will go after a corporation for selling off the various assets of the company as a means of generating a huge profit.

The corporate raids become effective when the raider has a solid financial backing and a clear strategy about acquiring process. The next step is to systematically dismantling a corporation in order to generate enough revenue to cover the investment and realize a profit. The corporate raider must have the knowledge about the companies who are in a position to be vulnerable enough to allow for the gradual acquisition of control, but still has enough stability and assets to be a desirable target. Therefore a company has equitable amount of liquid assets or disposable assets, but may be undergoing a slump in their stock price for some reason. The ability of the corporate raider to come in and purchase enough shares of stock to gain control is crucial to the success of the project.

Questions:

• What is a corporate raid?
• What are the steps in a corporate raid?