Corporate Raiders: The Art of Buying, Stripping, and Running

By Ryan Roychowdhury
April 2025

Imagine this: Little Billy across the street is running his fancy little lemonade stand—but oh wait—it’s not doing so great! His lemons are overpriced, his advertising budget is literally non-existent (a hand-drawn, misspelled sign barely hanging off the table), and worst of all, his mom says he can only work on weekends! But hey, that’s an opportunity for me to snatch up! I walk in, and coolly offer Billy $400 to buy his whole operation—funded entirely by a loan from my parents—and before you know it, I suddenly own Billy’s Lemonade Inc. (Note: This is called a leveraged buyout, or LBO, where I’m taking on a lot of debt to meet the acquisition, in hopes it’ll bring me greater future profits.)

Now, the fun begins. First of all, I sell Billy’s lemon tree to Timothy the lumberjack for $500, giving me an instant profit, as I watch Billy curl up in a ball, regretting his life decisions. Then, I hype up the stand’s “profitability” (based on that sneaky one-time tree sale), and convince some other kids to buy shares in my newly “successful” lemonade empire. Obviously, I cash out, making a fortune, as I sell off some of the other remaining valuable assets of the business. Meanwhile, Billy? Well, he’s standing on the curb with a bankrupt business and no lemons. 

Multiply this by millions, and welcome to the cutthroat world of corporate raiders.

The Golden Age of Hostile Takeovers

Back in the good ol’ fashioned 1980s, corporate raiding was a hot trend on Wall Street. It’s like the business world’s version of GTA—except for stealing cars, raiders would steal entire companies. And the absolute, unparalleled king of them all? None other than Carl Icahn.

Icahn had built quite an infamous reputation on Wall Street, for his shareholder activism, that quickly became toxic. Icahn’s most infamous move was his hostile takeover of Trans World Airlines (TWA) in 1985. Using an LBO, he gained control of the company, and immediately started selling off its most valuable assets to pay off the debt he used to buy it (a process known as “asset stripping”). Investors made money. Carl made loads of money. But TWA? It went bankrupt. Twice. Many employees lost their jobs. Truly sad stuff on Wall Street…

And if you thought that was all…you’d be so wrong. Icahn was far from alone. Other corporate raiders, like Michael Milken, and T. Boone Pckens, turned hostile takeovers into a twisted art form. Their playbook was really quite simple:

1. Find a struggling but valuable company (bonus points if the management is basically asleep at the wheel)

2. Buy a controlling stake using mostly borrowed money.

3. Start asset stripping—selling off the company’s valuable parts to make quick cash.

4. Convince investors everything is fine, drive up the stock price, and sell off shares at a premium.

5. Leave the company to collapse under the weight of its debt.

Defending Against the Raiders

Naturally, companies wouldn’t just take this abuse lying down. They started rolling out “poison pills”—or, in other words, defensive strategies designed to make hostile takeovers too expensive or too painful. Some of the most creative defenses included, but are not limited to:

• Flip-In: If an outsider buys too many shares, the company will flood the market with discounted shares for existing investors, making it annoyingly expensive for the raider to gain control.

• Golden Parachutes: CEOs and executives negotiate insane severance packages (that the raider would be liable to), so if they get ousted in a takeover, they walk away with millions. (Basically, they get paid to lose).

• The Pac-Man Defense: An extreme, where instead of getting eaten, the company being targeted turns around and tries to buy out the raider instead (the strategies just get more and more ridiculous).

• Crown Jewel Defense: The company sells off its most valuable assets (its jewels) to friendly buyers, making itself much less appealing.

Short-Term Pain vs. Long-Term Gain

In the long term, firing people and shutting down weak businesses is a good thing. A few hundred years ago, almost everyone was a farmer. Then, tractors, fertilizers, and irrigation systems came along, and now, only about 1% of the U.S. population farms—but that 1% feeds the other 99% and exports food worldwide. Millions of people lost their farming jobs, but hey, they eventually moved into other productive roles, such as engineers, doctors, and artists. The same principle applies to corporate raiding. It causes short-term pain, but in theory, it reallocates resources more efficiently.

That said, not everyone agrees on how exactly this should be handled. Some economists will argue it’s better to just rip the band-aid off and let companies fail quickly, so displaced, innocent (usually) workers can move on as fast as possible. Others believe this approach is too brutal, and that it’s better to slow the process down, giving industries time to adjust. Either way, corporate raiders accelerate the boom-bust cycle of the economy.

The Legacy of the Raiders

Today, the golden age of corporate raiding is mostly over. Regulations have tightened, poison pills are everywhere, and shareholders are a bit wiser (hopefully). But their legacy lives on. Carl Icahn? Still moving and making moves. Hedge funds? Still using aggressive tactics to shake up companies. And corporate America? Still filled to the brim with questionable procedures, frauds, operations, and golden parachutes that would make even Elon blush.

And let’s not forget—the corporate raiders aren’t the only ones using dirty tricks. Executives often manipulate financials to keep failing companies afloat longer than they should be. Look at the coal industry—it’s been dying for years, but political protection keeps it going. Corporate raiders just happen to make money killing companies rather than propping them up.

So next time you see a struggling business, just remember: with enough leverage and a little creative destruction, you too can become the next big corporate raider in town. Just don’t be surprised when Billy comes knocking on your door, looking for his lemon tree back. 

Have a good one, dear reader.