Raider

An individual or entity that attempts to gain a controlling interest in a company that is failing or is undervalued. The goal of a raider is to make a significant profit in a short timeframe by introducing and voting on actions that will increase shareholder value or selling business assets rather than rehabilitating its operations.

Raiders are usually either highly wealthy individuals or private equity firms with strong financial backing. However, they are rarely respected in the business world, especially by other investors and private equity firms that seek to build company value over time rather than taking a smash-and-grab approach. Many raiders have tried to rebrand themselves as “activist investors,” but that’s usually just a switch to a euphemistic term with no change in tactics.

Although raiding was very common in the 1970s through the 1990s, corporate America has developed strong defense strategies against takeovers, including what’s known as a “poison pill” strategies. These tactics have not completely stopped raiding, but they do prevent problems in some cases.

 

EXAMPLE:

After decades as a successful retailer, a now-failing company was relieved to see that an investor was buying a significant stake in the business. Unfortunately, the investor turned out to be a raider that was only interested in asset-stripping.