Legal Definitions - Raider

A raider, in the context of business and finance, refers to an individual or a firm that attempts to gain control of another company against the wishes of its current management and board of directors. This aggressive strategy is commonly known as a hostile takeover.

Raiders typically target companies that they believe are undervalued or possess valuable assets that are not being fully utilized by the existing management. Their objective is often to acquire a sufficient number of shares to secure a controlling interest in the target company. Once in control, the raider may then restructure the company, sell off its assets, or implement other significant changes to generate a substantial profit.

• Example 1: Unlocking Real Estate Value

  Imagine "Apex Acquisitions," an investment firm, identifies "Heritage Manufacturing," a long-standing industrial company with several large factory complexes located in prime urban areas. Heritage Manufacturing's core business is struggling, but Apex Acquisitions believes the real estate itself is significantly undervalued on the company's books. Apex launches a hostile bid to buy a controlling stake in Heritage Manufacturing, despite resistance from its board. Their plan is to shut down the manufacturing operations, rezone the land, and sell it to real estate developers for a substantial profit.

  This illustrates a raider because Apex Acquisitions is attempting a hostile takeover of Heritage Manufacturing, not to continue its core business, but to unlock the hidden value of its physical assets by dismantling parts of the original company for financial gain.

• Example 2: Capitalizing on Brand and Intellectual Property

  Consider "Disruptive Capital," a private equity firm known for its aggressive acquisition tactics. Disruptive Capital sets its sights on "Classic Games Inc.," a venerable video game company with a beloved portfolio of retro game titles and a loyal fan base, but whose stock price has been stagnant due to outdated management and a lack of new product innovation. Disruptive Capital believes the brand name and the extensive intellectual property (the old game designs and characters) are highly valuable, even if the current management isn't capitalizing on them. The firm begins buying up shares, intending to replace the board, streamline operations, sell off underperforming divisions, and potentially license the valuable brand assets to other game developers, thereby generating a quick return on investment.

  Here, Disruptive Capital acts as a raider by pursuing a hostile takeover of Classic Games Inc., aiming to exploit the company's undervalued brand and intellectual property for profit, rather than supporting its existing business model.