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Corporate raiders, who might also be referred to as activist investors, seek to maximize shareholder value for investors. A raider's personal interest is often involved as this investor may attempt to generate sizable profits in the process often at the disdain of corporate executives. Activist investors typically abide by any regulation in place in a region and subsequently the targets of activist investor activities are often forced to fight back with financial and other available resources.
Any aggressive activity by corporate raiders must typically be preceded by an activist investor obtaining equity interest in a target company. In order to begin having influence in the direction of a business, investors must own a minimum stake in that company in equity shares based on regional laws. As activist investors' increase ownership in a stock, the buying activity is documented in regulatory filings, so the public can theoretically recognize when some activist activity is brewing.
Investors considered corporate raiders typically have access to large sums of money. Some of these individuals manage assets for clients. The strategy of the investment firm, such as a hedge fund, could be to identify corporations that do not appear to be delivering a stock's profit potential and attempting to turn that business around to benefit clients and the activist investor.
A common strategy is to seek to obtain seats on a company's board of directors, which gives corporate raiders a voice on major company events. This strategy is not always successful, as in order to gain a place on a company's board, investors need to win the approval of shareholders. Corporate raiders often go to great lengths using different outlets, such as the media, to communicate to shareholders why a change is needed.
The desires of corporate raiders are often in stark contrast to the direction that corporate executives seek to take a business. This is largely the catalyst for contempt that often exists between the parties. A common strategy for corporate raiders is to step in and attempt to interfere with a plan that management has disclosed, such as a merger or acquisition. A strategy could be for the activist investor himself or herself to present a bid to buy the business that shareholders cannot refuse.
One way that activists investors interfere could be to rally investor support for a proxy fight with corporate executives. A company merger could have all the merits in the world, but it needs shareholder support to become reality. If enough shareholders side with a corporate raider who opposes a merger, these individuals will not vote in support of the deal, which could prevent the transaction from occurring and grant the activist investor success.
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