Raider

AAA

DEFINITION of 'Raider'

An individual or organization that tries to take over a company by initiating a hostile takeover bid. Raiders look for companies with undervalued assets and then attempt a hostile takeover by purchasing enough shares to gain a controlling interest. The raider's objective is usually to generate huge profits in a reasonably short span of time, by breaking up the target company and selling off its assets, rather than attempting to turn its operations around and unlock value over the long haul.


Modern-day raiders prefer to go by the moniker "activist shareholders."

INVESTOPEDIA EXPLAINS 'Raider'

Raiders need to have deep pockets and plenty of financial support in order to embark upon their raids. They must also have a well-defined exit strategy to realize profits through asset sales.

Companies with substantially undervalued assets on their books and no measures in place to protect against hostile takeovers, are vulnerable to raider attacks.

For example, consider a company with a market value of $100 million, no debt and $25 million in cash, giving it an enterprise value of $75 million. If the market value of the company's tangible assets is about $200 million, a raider may be tempted to mount a hostile bid in order to capture the huge gains that could be realized by selling its assets.

VIDEO

Loading the player...
RELATED TERMS
  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for ...
  3. Asset Stripper

    An individual or company, which purchases a corporation with ...
  4. Saturday Night Special

    An obsolete takeover strategy where one company attempted a takeover ...
  5. Tender Offer

    An offer to purchase some or all of shareholders' shares in a ...
  6. Hostile Takeover

    The acquisition of one company (called the target company) by ...
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Entrepreneurship

    The CEO Dream Team - Walton, Schwab, Marcus And Blank

    The successes of these three CEOs can be linked back to one common factor: customer service.
  3. Mutual Funds & ETFs

    Corporate Takeover Defense: A Shareholder's Perspective

    Find out the strategies corporations use to protect themselves from unwanted acquisitions.
  4. Options & Futures

    The Basics Of Mergers And Acquisitions

    Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work.
  5. Investing

    Wizards Of Odd: A Trip To Tech Land

    I spent a couple of days in Silicon Valley, and here are some key lessons I learned after meeting with a number of tech CEOs and venture capitalist.
  6. Stock Analysis

    Will Kraft-Heinz Be a Winner?

    Kraft and Heinz are now one. This should present a profitable long-term investment opportunity, but isn't likely to be smooth sailing at first.
  7. Investing

    WhatsApp: The Best Facebook Purchase Ever?

    WhatsApp is Facebook's largest acquisition to date. What makes it worth the major price tag?
  8. Investing Basics

    Explaining Pro-Rata

    Pro-rata is a term meaning a fraction of a whole based on a relationship to the whole. Proportionate allocations are made pro-rata.
  9. Investing

    What are Preference Shares?

    Preference shares, also referred to as preferred shares, are equity shares that give the shareholders certain rights ahead of common shareholders. For instance, when the corporation declares ...
  10. Stock Analysis

    Intel Doesn't Need New Management

    Intel's purported manufacturing technology prowess has been completely squandered in the mobile arena, and the stock has been a disappointment.

You May Also Like

Hot Definitions
  1. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  2. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  3. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  4. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  5. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  6. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
Trading Center