BROWSE

Takeover Artist

What is 'Takeover Artist'

An investor or company whose primary goal is to identify companies that are attractive to buy and that can be turned around to make a profit. A takeover artist will usually use a lot of debt (leverage) to make the purchase, and restructure the company for resale or add the company to an existing group of companies.

Explaining 'Takeover Artist'

Takeover artists are also sometimes referred to as corporate raiders. Frequently, the reason for a takeover is to remove entrenched management that the corporate raider believes is incompetent. For example, in the 1980s, Carl Icahn (a well-known takeover artist), launched a takeover of Trans World Airlines and turned the company from an unprofitable company to a profitable one in a few short years. He took the company from a loss of $193 million in 1985 to a profit of $106 million in 1987, and $250 million the next year. However, it was short-lived, as Trans World Airlines posted a $298 million loss in 1989.


Further Reading


How movies created the financial crisis
heinonline.org [PDF]
… Oliver Stone's 1987 film, Wall Street, which portrayed an evil insider-trading, company-destroying takeover artist … ten years in jail for technical violations of a federal anti- takeover statute that … He adds that the result- ing "public[] hostility or indifference to takeovers made political …

From ambushes to golden parachutes: Corporate takeovers as an instance of cultural framing and institutional integrationFrom ambushes to golden parachutes: Corporate takeovers as an instance of cultural framing and institutional integration
www.journals.uchicago.edu [PDF]
… Oliver Stone's 1987 film, Wall Street, which portrayed an evil insider-trading, company-destroying takeover artist … ten years in jail for technical violations of a federal anti- takeover statute that … He adds that the result- ing "public[] hostility or indifference to takeovers made political …

Discouraging rivals: Managerial rent-seeking and economic inefficienciesDiscouraging rivals: Managerial rent-seeking and economic inefficiencies
www.nber.org [PDF]
… Oliver Stone's 1987 film, Wall Street, which portrayed an evil insider-trading, company-destroying takeover artist … ten years in jail for technical violations of a federal anti- takeover statute that … He adds that the result- ing "public[] hostility or indifference to takeovers made political …

Shareholder wealth effects of corporate takeovers: the UK experience 1955–1985Shareholder wealth effects of corporate takeovers: the UK experience 1955–1985
www.sciencedirect.com [PDF]
… Oliver Stone's 1987 film, Wall Street, which portrayed an evil insider-trading, company-destroying takeover artist … ten years in jail for technical violations of a federal anti- takeover statute that … He adds that the result- ing "public[] hostility or indifference to takeovers made political …

Takeovers: Folklore and scienceTakeovers: Folklore and science
papers.ssrn.com [PDF]
… Oliver Stone's 1987 film, Wall Street, which portrayed an evil insider-trading, company-destroying takeover artist … ten years in jail for technical violations of a federal anti- takeover statute that … He adds that the result- ing "public[] hostility or indifference to takeovers made political …

Ancient redwoods and the politics of finance: The hostile takeover of the Pacific Lumber CompanyAncient redwoods and the politics of finance: The hostile takeover of the Pacific Lumber Company
www.sciencedirect.com [PDF]
… Oliver Stone's 1987 film, Wall Street, which portrayed an evil insider-trading, company-destroying takeover artist … ten years in jail for technical violations of a federal anti- takeover statute that … He adds that the result- ing "public[] hostility or indifference to takeovers made political …

Law and the Theory of Finance: Some IntersectionsLaw and the Theory of Finance: Some Intersections
heinonline.org [PDF]
… Oliver Stone's 1987 film, Wall Street, which portrayed an evil insider-trading, company-destroying takeover artist … ten years in jail for technical violations of a federal anti- takeover statute that … He adds that the result- ing "public[] hostility or indifference to takeovers made political …

Europe's Thirteenth Directive and US takeover regulation: regulatory means and political and economic endsEurope's Thirteenth Directive and US takeover regulation: regulatory means and political and economic ends
heinonline.org [PDF]
… Oliver Stone's 1987 film, Wall Street, which portrayed an evil insider-trading, company-destroying takeover artist … ten years in jail for technical violations of a federal anti- takeover statute that … He adds that the result- ing "public[] hostility or indifference to takeovers made political …

Looting: the economic underworld of bankruptcy for profitLooting: the economic underworld of bankruptcy for profit
www.jstor.org [PDF]
… Oliver Stone's 1987 film, Wall Street, which portrayed an evil insider-trading, company-destroying takeover artist … ten years in jail for technical violations of a federal anti- takeover statute that … He adds that the result- ing "public[] hostility or indifference to takeovers made political …



Q&A About Takeover Artist


Was Mr. Icahn successful at turning around companies ?

Yes

Why would you remove entrenched management?

To improve profitability of the company.

Does this mean that Mr. Icahn's strategy didn't work out very well for TWA shareholders ?

Yes, his strategy didn't work out very well for TWA shareholders .

Who are usually on the target company's board of directors?

Shareholders and management.

Is a friendly takeover always approved by the target company's board of directors?

No, it can be rejected.

How do you restructure a company for resale?

You restructure the company by removing entrenched management, which may be incompetent.

Is financing required for all takeovers?

No, not all takeovers require financing because some companies have enough cash to pay for their acquisitions themselves without borrowing money from banks or issuing stock to investors .

Can you give an example of how financing works with a takeover ?

If Company A wants to acquire Company B , they will first approach Company B 's board and ask permission to conduct due diligence on Company B . Once this has been completed , Company A will make an offer for Company B at either more than what they think its worth (a premium ) or less than what they think its worth (a discount ). After this , if accepted , then both parties enter into negotiations and work out terms such as price , payment schedule etc . This process takes around two months on average but can be longer depending on how quickly both parties agree upon terms . Once agreed

What does an ideal world look like when considering a takeover?

The board recommends that shareholders accept the offer if it serves them better than rejecting it.

What happened after Mr. Icahn took over TWA?

The airline posted losses in 1989, but it was short-lived because TWA filed for bankruptcy protection in 1992 and ceased operations entirely on February 13, 2001 .

What does the takeover artist use as leverage?

The takeover artist uses debt (leverage) in order to purchase the company.

What is a takeover artist?

A takeover artist is an investor or company whose primary goal is to identify companies that are attractive to buy and that can be turned around to make a profit.

What does financing a takeover involve?

Financing involves loans or bond issues which may include junk bonds as well as simple cash offers. It can also include shares in the new company.

Who was Carl Icahn and what did he do with Trans World Airlines?

Carl Icahn was a well-known corporate raider who took over Trans World Airlines in 1985 and turned it from an unprofitable airline into a profitable one within three years.

Are there different types of takeovers?

Yes, there are different types including friendly, hostile, reverse or back-flip takeovers.

Is there another example of how Mr. Icahn used leverage during his career as a corporate raider ?

Yes, he also used leverage when he bought shares of Texaco Inc., using debt worth $7 billion , which enabled him to gain control of Texaco Inc.. He then sold off assets such as oil fields and refineries at high prices before selling the remaining assets back to Texaco Inc.. He made approximately $500 million from this transaction .

How do you acquire shares in a private company?

You buy them from other shareholders or management.