corporation A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and ...

shareholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the legal o ...

publicly traded A public company is a company whose ownership is organized via shares of stock which are intended to be freely traded on a stock exchange or in over-the-counter markets. A public (publicly traded) company can be listed on a stock exchange ( ...

hostile takeover In business, a takeover is the purchase of one company (the ''target'') by another (the ''acquirer'' or ''bidder''). In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to t ...

golden parachute A golden parachute is an agreement between a company and an employee (usually an upper executive) specifying that the employee will receive certain significant benefits if employment is terminated. These may include severance pay, cash bonuses, ...

debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...

balance sheet In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business ...

activist shareholder An activist shareholder is a shareholder who uses an equity stake in a corporation to put pressure on its management. A fairly small stake (less than 10% of outstanding shares) may be enough to launch a successful campaign. In comparison, a full ...

Louis Wolfson Louis Elwood Wolfson (January 28, 1912 – December 30, 2007) was an American financier, a convicted felon, and one of the first modern corporate raiders, labeled by '' Time'' as such in a 1956 article.Carl Icahn, Victor Posner, Meshulam Riklis, Nelson Peltz, Robert M. Bass, T. Boone Pickens,

Paul Bilzerian Paul Alec Bilzerian ( hy, Փօլ Պիլզերեան, born 1950) is an American businessman and corporate takeover specialist. Education and family Bilzerian was born in Miami, Florida but grew up in Worcester, Massachusetts in an Armenian Ameri ...

,

Harold Clark Simmons Harold Clark Simmons (May 13, 1931 – December 29, 2013) was an American businessman, investor, and philanthropist whose banking expertise helped him develop the acquisition concept known as the leveraged buyout (LBO) to acquire various corporat ...

,

Kirk Kerkorian Kerkor Kerkorian ( hy, Գրիգոր Գրիգորեան; June 6, 1917 – June 15, 2015) was an American businessman, investor, and philanthropist. He was the president and CEO of Tracinda Corporation, his private holding company based in Beve ...

, Sir James Goldsmith,

Saul Steinberg Saul Steinberg (June 15, 1914 – May 12, 1999) was a Romanian-American artist, best known for his work for '' The New Yorker'', most notably '' View of the World from 9th Avenue''. He described himself as "a writer who draws". Biography S ...

and

Asher Edelman Asher Barry Edelman (born November 26, 1939) is an American financier. Biography Edelman was the son of New York real estate investor, Richard M. Edelman. He graduated from Bard College and in 1961, he went to work for Halle and Stieglitz whe ...

. These investors used a number of the same tactics and targeted the same type of companies as more traditional leveraged buyouts and in many ways could be considered a forerunner of the later private equity firms. In fact it is Posner, one of the first "corporate raiders" who is often credited with coining the term "

leveraged buyout A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of borrowed money ( leverage) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loa ...

" or "LBO". Victor Posner, who had made a fortune in real estate investments in the 1930s and 1940s, acquired a major stake in DWG Corporation in 1966. Having gained control of the company, he used it as an investment vehicle that could execute

takeover In business, a takeover is the purchase of one company (the ''target'') by another (the ''acquirer'' or ''bidder''). In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to ...

s of other companies. Posner and DWG are perhaps best known for the hostile takeover of

Sharon Steel Corporation Sharon ( he, שָׁרוֹן ''Šārôn'' "plain") is a given name as well as an Israeli surname. In English-speaking areas, Sharon is now predominantly a feminine given name. However, historically it was also used as a masculine given name. In I ...

in 1969, one of the earliest such takeovers in the United States. Posner's investments were typically motivated by attractive valuations, balance sheets and cash flow characteristics. Because of its high debt load, Posner's DWG generated attractive but highly volatile returns and ultimately landed in financial difficulty. In 1987, Sharon Steel entered

Chapter 11 Chapter 11 of the United States Bankruptcy Code (Title 11 of the United States Code) permits reorganization under the bankruptcy laws of the United States. Such reorganization, known as Chapter 11 bankruptcy, is available to every business, wheth ...

bankruptcy protection. Carl Icahn developed a reputation as a ruthless "corporate raider" after his

hostile takeover In business, a takeover is the purchase of one company (the ''target'') by another (the ''acquirer'' or ''bidder''). In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to t ...

of TWA in 1985."10 Questions for Carl Icahn"
by Barbara Kiviat, ''

Time Time is the continued sequence of existence and event (philosophy), events that occurs in an apparently irreversible process, irreversible succession from the past, through the present, into the future. It is a component quantity of various me ...

'', February 15, 2007 The result of that takeover was Icahn systematically selling TWA's assets to repay the debt he used to purchase the company, which was described as "

asset stripping Asset stripping is a term used to refer to the practice of selling off a company's assets in order to improve returns for equity investors. In many cases where the term is used, a financial investor, referred to as a ' corporate raider', takes con ...

". Icahn also attempted the grand prize of U.S. Steel, launching a hostile takeover for 89% of the industrial giant for $7 billion ($ billion today) in late 1986 and only being rebuffed finally by CEO David Roderick on January 8, 1987. T. Boone Pickens' hostile takeover bid of

Gulf Oil Gulf Oil was a major global oil company in operation from 1901 to 1985. The eighth-largest American manufacturing company in 1941 and the ninth-largest in 1979, Gulf Oil was one of the so-called Seven Sisters oil companies. Prior to its merger ...

in 1984 led to shock that such a large company could be raided. Gulf eventually sold out to

Chevron Chevron (often relating to V-shaped patterns) may refer to: Science and technology * Chevron (aerospace), sawtooth patterns on some jet engines * Chevron (anatomy), a bone * '' Eulithis testata'', a moth * Chevron (geology), a fold in rock la ...

for a then-record $13.3 billion ($ billion today) "white knight" buyout.

Paul Bilzerian Paul Alec Bilzerian ( hy, Փօլ Պիլզերեան, born 1950) is an American businessman and corporate takeover specialist. Education and family Bilzerian was born in Miami, Florida but grew up in Worcester, Massachusetts in an Armenian Ameri ...

launched a number of takeover bids including

Cluett Peabody & Company Cluett Peabody & Company, Inc. once headquartered in Troy, New York, was a longtime manufacturer of shirts, detachable shirt cuffs and collars, and related apparel. It is best known for its Arrow brand collars and shirts and the related Arrow Col ...

,

Hammermill Paper Company Hammermill Paper Company is an American paper manufacturer originally founded in 1898 as the Ernst R. Behrend Company. The company was purchased in 1986 by International Paper Company, where the namesake survives as a brand of paper. History Hamme ...

, Pay n Pack Stores,

Allied Stores Allied Stores was a department store chain in the United States. It was founded in the 1930s as part of a general consolidation in the retail sector by B. E. Puckett. See also Associated Dry Goods. It was the successor to Hahn's Department Stor ...

and the

Singer Corporation Singer Corporation is an American manufacturer of consumer sewing machines, first established as I. M. Singer & Co. in 1851 by Isaac Singer, Isaac M. Singer with New York lawyer Edward Cabot Clark, Edward C. Clark. Best known for its sewing mac ...

. All of his takeover bids were for all cash and for all shares and he refused any

greenmail Greenmail or greenmailing is the action of purchasing enough shares in a firm to challenge a firm's leadership with the threat of a hostile takeover to force the target company to buy the purchased shares back at a premium in order to prevent the ...

. Bilzerian was indicted for Schedule13(d) disclosure violations and despite his claims of innocence he was convicted in 1989. After spending thirty years fighting the government in his attempt to overturn his conviction, he renounced his US citizenship in 2019. British raider Beazer also launched several successful hostile takeovers in the 1980s, the largest being that of

Koppers Koppers is a global chemical and materials company based in Pittsburgh, Pennsylvania, United States in an art-deco 1920s skyscraper, the Koppers Tower. Structure Koppers is an integrated global producer of carbon compounds, chemicals, and tre ...

in early 1988 for $1.81 billion ($ billion today). Many of the corporate raiders of the 1980s were onetime clients of

Michael Milken Michael Robert Milken (born July 4, 1946) is an American financier. He is known for his role in the development of the market for high-yield bonds ("junk bonds"), and his conviction and sentence following a guilty plea on felony charges for vio ...

, whose investment banking firm,

Drexel Burnham Lambert Drexel Burnham Lambert was an American multinational investment bank that was forced into bankruptcy in 1990 due to its involvement in illegal activities in the junk bond market, driven by senior executive Michael Milken. At its height, it was ...

helped raise blind pools of capital which corporate raiders could use to make legitimate attempts to take over companies and provide

high-yield debt In finance, a high-yield bond (non-investment-grade bond, speculative-grade bond, or junk bond) is a Bond (finance), bond that is rated below investment grade by credit rating agencies. These bonds have a higher risk of default (finance), defau ...

financing of the buyouts.

Ronald Perelman and Revlon

Drexel Burnham raised a $100 million blind pool in 1984 for Nelson Peltz and his holding company Triangle Industries (later Triarc) to give credibility for takeovers, representing the first major blind pool raised for this purpose. Two years later, in 1986, Wickes Companies, a

holding company A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own shares of other companies ...

run by Sanford Sigoloff, would raise a $1.2 billion blind pool. In later years, Milken and Drexel would shy away from certain of the more "notorious" corporate raiders as the firm and the private equity industry attempted to move upscale. In 1985, Milken raised $750 million for a similar blind pool for

Ronald Perelman Ronald Owen Perelman (; born January 1, 1943) is an American banker, businessman and investor. MacAndrews & Forbes Incorporated, his company, has invested in companies with interests in groceries, cigars, licorice, makeup, cars, photography, t ...

, which would ultimately prove instrumental in acquiring his biggest target: The Revlon Corporation. In 1980,

Ronald Perelman Ronald Owen Perelman (; born January 1, 1943) is an American banker, businessman and investor. MacAndrews & Forbes Incorporated, his company, has invested in companies with interests in groceries, cigars, licorice, makeup, cars, photography, t ...

, the son of a wealthy Philadelphia businessman, and future "corporate raider", having made several small but successful buyouts, acquired

MacAndrews & Forbes MacAndrews & Forbes Incorporated is an American Conglomerate (company), diversified holding company wholly owned by billionaire investor Ronald Perelman. Current investments include leading participants across a wide range of industries, from co ...

, a distributor of licorice extract and chocolate, which Perelman's father had tried and failed to acquire 10 years earlier.. Perelman would ultimately divest the company's core business and use

MacAndrews & Forbes MacAndrews & Forbes Incorporated is an American Conglomerate (company), diversified holding company wholly owned by billionaire investor Ronald Perelman. Current investments include leading participants across a wide range of industries, from co ...

as a holding company investment vehicle for subsequent leveraged buyouts including Technicolor, Inc., Pantry Pride and

Revlon Revlon, Inc. is an American multinational company dealing in cosmetics, skin care, fragrance, and personal care. The headquarters of Revlon was established in New York City on March 1, 1932, where it still remains. Revlon was founded by brother ...

. Using the Pantry Pride subsidiary of his holding company, MacAndrews & Forbes Holdings, Perelman's overtures were rebuffed. Repeatedly rejected by the company's board and management, Perelman continued to press forward with a

hostile takeover In business, a takeover is the purchase of one company (the ''target'') by another (the ''acquirer'' or ''bidder''). In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to t ...

, raising his offer from an initial bid of $47.50 per share until it reached $53.00 per share. After

Revlon Revlon, Inc. is an American multinational company dealing in cosmetics, skin care, fragrance, and personal care. The headquarters of Revlon was established in New York City on March 1, 1932, where it still remains. Revlon was founded by brother ...

received a higher offer from a

white knight A white knight is a mythological figure and literary stock character. They are portrayed alongside a black knight as diametric opposites. A white knight usually represents a heroic warrior fighting against evil, with the role in medieval literatu ...

, private equity firm Forstmann Little & Company, Perelman's Pantry Pride finally was able to make a successful bid for

Revlon Revlon, Inc. is an American multinational company dealing in cosmetics, skin care, fragrance, and personal care. The headquarters of Revlon was established in New York City on March 1, 1932, where it still remains. Revlon was founded by brother ...

, valuing the company at $2.7 billion. The buyout would prove troubling, burdened by a heavy debt load.... Under Perelman's control, Revlon sold 4 divisions: two were sold for $1 billion, its vision care division was sold for $574 million, and its National Health Laboratories division was spun out to the public market in 1988. Revlon also made acquisitions including

Max Factor Max Factor is a line of cosmetics from Coty, Inc. It was founded in 1909 as Max Factor & Company by Maksymilian Faktorowicz. Max Factor specialized in movie make-up. Until its 1973 sale for US$500 million (approximately $ billion in 2017 dollar ...

in 1987 and Betrix in 1989, later selling them to

Procter & Gamble The Procter & Gamble Company (P&G) is an American multinational consumer goods corporation headquartered in Cincinnati, Ohio, founded in 1837 by William Procter and James Gamble. It specializes in a wide range of personal health/consumer he ...

in 1991. Perelman exited the bulk of his holdings in Revlon through an IPO in 1996 and subsequent sales of stock. As of December 31, 2007, Perelman still retains a minority ownership interest in Revlon. The Revlon takeover, because of its well-known brand, was profiled widely by the media and brought new attention to the emerging boom in leveraged buyout activity. Litigation associated with the takeover has also become standard reading for introductory business organization classes in most law schools, introducing what have come to be known as "Revlon duties" for boards of companies that are up for auction.

Decline of the corporate raiders

In the late 1980s several famous corporate raiders suffered from bad investments financed by large amounts of leverage, ultimately losing money for their investors. Additionally, with the fall of

Michael Milken Michael Robert Milken (born July 4, 1946) is an American financier. He is known for his role in the development of the market for high-yield bonds ("junk bonds"), and his conviction and sentence following a guilty plea on felony charges for vio ...

and the subsequent collapse of

Drexel Burnham Lambert Drexel Burnham Lambert was an American multinational investment bank that was forced into bankruptcy in 1990 due to its involvement in illegal activities in the junk bond market, driven by senior executive Michael Milken. At its height, it was ...

, the credit lines for these investors dried up. By the end of the decade, management of many large

publicly traded A public company is a company whose ownership is organized via shares of stock which are intended to be freely traded on a stock exchange or in over-the-counter markets. A public (publicly traded) company can be listed on a stock exchange ( ...

corporations reacted negatively to the threat of potential hostile takeover or corporate raid and pursued drastic defensive measures including poison pills,

golden parachute A golden parachute is an agreement between a company and an employee (usually an upper executive) specifying that the employee will receive certain significant benefits if employment is terminated. These may include severance pay, cash bonuses, ...

s and increasing

debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...

levels on the company's

balance sheet In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business ...

. Finally, in the 1990s the overall price of the American stock market increased, which reduced the number of situations in which a company's share price was low with respect to the assets that it controlled. By the end of the 1990s, the corporate raider moniker was used less frequently as private equity firms pursued different tactics than their predecessors. In later years, many of the corporate raiders would be re-characterized as "

activist shareholder An activist shareholder is a shareholder who uses an equity stake in a corporation to put pressure on its management. A fairly small stake (less than 10% of outstanding shares) may be enough to launch a successful campaign. In comparison, a full ...

s", such as Carl Icahn during his 2008 profile on CBS's ''

60 Minutes ''60 Minutes'' is an American television news magazine broadcast on the CBS television network. Debuting in 1968, the program was created by Don Hewitt and Bill Leonard, who chose to set it apart from other news programs by using a unique st ...

''.The Icahn Lift: 60 Minutes' Lesley Stahl Profiles The Billionaire Investor
, ''

60 Minutes ''60 Minutes'' is an American television news magazine broadcast on the CBS television network. Debuting in 1968, the program was created by Don Hewitt and Bill Leonard, who chose to set it apart from other news programs by using a unique st ...

'', March 9, 2008.

Media reflections of corporate raiders

Although private equity rarely received a thorough treatment in popular culture, several films did feature stereotypical "corporate raiders" prominently. Among the most notable examples of private equity featured in motion pictures included: * ''Gordon Gekko'', ''

Wall Street Wall Street is an eight-block-long street in the Financial District of Lower Manhattan in New York City. It runs between Broadway in the west to South Street and the East River in the east. The term "Wall Street" has become a metonym for ...

'' (1987) and '' Wall Street: Money Never Sleeps'' (2010) – The notorious "corporate raider" and greenmailer,

Gordon Gekko Gordon Gekko is a composite character in the 1987 film '' Wall Street'' and its 2010 sequel '' Wall Street: Money Never Sleeps'', both directed by Oliver Stone. Gekko was portrayed by actor Michael Douglas, whose performance in the first fil ...

(played by

Michael Douglas Michael Kirk Douglas (born September 25, 1944) is an American actor and film producer. He has received numerous accolades, including two Academy Awards, five Golden Globe Awards, a Primetime Emmy Award, the Cecil B. DeMille Award, and the AF ...

), represents a synthesis of the worst features of various famous private equity figures. In the film, the character intends to manipulate an ambitious young stockbroker to take over a failing, but decent, airline. Although Gekko makes a pretense of caring about the airline, his intentions prove to be to destroy the airline, strip its assets and lay off its employees before raiding the corporate

pension fund A pension fund, also known as a superannuation fund in some countries, is any plan, fund, or scheme which provides retirement income. Pension funds typically have large amounts of money to invest and are the major investors in listed and priva ...

. Gekko would become a symbol in popular culture for unrestrained greed (with the signature line, "Greed, for lack of a better word, is good") that would be attached to the private equity industry. ''Sir Lawrence Wildman'', based on Sir James Goldsmith also appears in Wall Street. * ''Larry the Liquidator'', '' Other People's Money'' (1990) – A self-absorbed corporate raider "Larry the Liquidator" (

Danny DeVito Daniel Michael DeVito Jr. (born November 17, 1944) is an American actor, comedian, and filmmaker. He gained prominence for his portrayal of the taxi dispatcher Louie De Palma in the television series ''Taxi'' (1978–1983), which won him a Gold ...

), sets his sights on New England Wire and Cable, a small-town business run by family patriarch (

Gregory Peck Eldred Gregory Peck (April 5, 1916 – June 12, 2003) was an American actor and one of the most popular film stars from the 1940s to the 1970s. In 1999, the American Film Institute named Peck the 12th-greatest male star of Classic Hollywood ...

) who is principally interested in protecting his employees and the town. Larry ultimately wins over the shareholders when he admits he did not cause the company to fail; rather it was making outmoded equipment, using the analogy of 19th Century buggy whip makers who failed to realize they were being superseded by the automobile. * ''Edward Lewis'', ''

Pretty Woman ''Pretty Woman'' is a 1990 American romantic comedy film directed by Garry Marshall, from a screenplay by J. F. Lawton. The film stars Julia Roberts and Richard Gere, and features Héctor Elizondo, Ralph Bellamy (in his final performance) ...

'' (1990) – Corporate raider Edward Lewis (

Richard Gere Richard Tiffany Gere ( ; born August 31, 1949) is an American actor. He began in films in the 1970s, playing a supporting role in '' Looking for Mr. Goodbar'' (1977) and a starring role in ''Days of Heaven'' (1978). He came to prominence with ...

) attempts to make a hostile takeover of Morse Industries. Edward explains what he does for a living to Vivian (

Julia Roberts Julia Fiona Roberts (born October 28, 1967) is an American actress. Known for her leading roles in films encompassing a variety of genres, she has received multiple accolades, including an Academy Award, a British Academy Film Award, and th ...

): he buys large companies that are on the verge of bankruptcy, breaks them up and sells them in smaller parts, at a price that's more than the whole company, for profit. * ''Devin Weston'', ''

Grand Theft Auto V ''Grand Theft Auto V'' is a 2013 action-adventure game developed by Rockstar North and published by Rockstar Games. It is the seventh main entry in the ''Grand Theft Auto'' series, following 2008's ''Grand Theft Auto IV'', and the fifteenth in ...

'' (2013) – Weston is initially presented as a self-made billionaire who made his fortune as a

venture capitalist Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which ha ...

. In reality, he is a corporate raider who finds loopholes in legal contracts that he uses to strip companies of their assets simply because he can, and because he enjoys knowing that his victims can do nothing to stop him. Over the course of the game, he attempts to force the Richards Majestic film studio into bankruptcy by sabotaging production of a major film, leaving the owners with no choice but to sell their stake in the company to him. Once he has a majority shareholding (and after collecting the insurance on the film), he plans to tear the studios down and build luxury apartments in their place. The player is able to prevent this from happening by retrieving the film stolen by Weston, but this causes Weston to harbour a grudge against the player character, and he becomes one of the primary antagonists of the game. If the player chooses Ending C, Weston is killed along with the other three antagonists.

History

Ronald Perelman and Revlon

Decline of the corporate raiders

Media reflections of corporate raiders

References

Further reading