Corporate Raiding In India

An Overview:				The management team's jobs were once
The twentieth century began with the process of				againsecure. Unfortunately, the remaining organization
transformation of entire business scenario. The				was in a financial mess[17].
economy of India which was hitherto controlled and				Merger or takeover or acquisition can be achieved by
regulated by the Government was set free to seize				following different means such as purchase of assets
new opportunities available in the world. With the				or shares of a target company or by means of
announcement of the policy of globalization, the				scheme of arrangement following the procedure laid
doors of Indian economy were opened for the				down under the Companies Act, 1956 under section
overseas investors. But to compete at the world				391 to 396A. The raids, bids and defences are the
platform, the scale of business was needed to be				outcome of human, moods. Corporate wars and
increased. In this changed scenario, mergers and				offensive postures can be avoided and the war
acquisitions were the best option available for the				moods of opponents can be stalled through
corporates considering the time factor involved in				defensive steps. In most countries, a hostile
capturing the opportunities made available by the				takeover or corporate raid is a method for taking
globalization.				over a company by buying a large stake, typically
This new weapon in the armoury of corporates				without the explicit approval of either the board or
though proved to be beneficial but soon the				shareholders, and then using shareholder voting rights
predators with huge disposable wealth started				to enact measures directed at increasing the
exploiting this opportunity to the prejudice of retail				company's share value (cost cutting, restructuring,
investor. This created a need for some regulation to				downsizing, liquidation, selling off assets, etc.). Such
protect the interest of investors so that the process				raids in India may involve the use of law
of takeover and mergers is used to develop the				enforcement agencies or security services to force
securities market and not to sabotage it[1].				out the current management, and often seek the
Broadly, speaking, companies incorporated under the				capture of documents to make future fraudulent
Act can be classified as:				legal filings. Other raiding techniques include forced
(i) A public company listed on recognized stock				insolvency, documents falsification, fraudulent share
exchanges, i.e., a listed public company;				registries, greenmail, shareholder lawsuits, and more
(ii) A public company not listed on any stock				recently, partnering with financial institutions to use
exchanges, i.e., an unlisted public company;				credit as means to acquire real assets. Corporate
(ill) A private company; and				raiding evolved in Russia during 1990s' when the
(iv) A private company, which is subsidiary of a public				Soviet Union collapsed and led the economy towards
company.				privatization. Raiding is done in following types such as
The recent M&A boom in India has been				Creditor-based attacks, Forced insolvency,
comprised exclusively of friendly deals, and since its				Shareholder schemes, Abuse of complicated business
economic liberalization in 1991, India has experienced				laws, Takeover with the use of physical force. The
only a handful of hostile takeover attempts.				case of Hermitage Capital and its media-savvy CEO
Conventional wisdom suggests that hostile takeovers				William Browder is notable as an example of raiding.
by foreign enterprises will not occur in India because				Consequences of raiding is broader than which can be
of (i) the prevalence of controlling shareholders in				visualised it may lead to political, social or economic
most Indian corporations and the significant				problems. As corporate raiding becomes more
shareholding of Indian financial institutions that				pervasive than it already is, successful entrepreneurs
generally side with controllers, (ii) the necessity of				must also spend a significant amount of time and
obtaining onerous government approvals for foreign				resources protecting their businesses from raiders,
acquisitions that would make hostile takeovers				risking the loss of property, jail, or even physical
impossible, and (iii) provisions in the Indian Takeover				violence if hostile takeovers fails. There is a necessity
Code favoring existing controlling shareholders.				for the business community to be educated about
Analysis of the shareholding composition, legal				the possible threat that may be caused by the
impediments and regulatory restrictions facing the				raiders, they should be educated with regard to their
BSE 100 and BSE 500 companies in India suggests				ownership rights, share registries etc,. The Central
that presently at least 8-15% of Indian companies,				Government has favoured mergers and
including some of India's most prominent, face the				amalgamations and takeovers when such
theoretical prospect of being taken over by foreign				combinations of two or more companies are in the
acquirers without the consent of existing controlling				interest of general public and for promotion of
shareholders. And unlike their counterparts in the				industry and trade. But it is the policy of the
United States, these vulnerable Indian companies may				Government to safeguard the interest of
not avail themselves of takeover defences such as				shareholders and investors hence the Government
the poison pill and staggered board; indeed, aside				constituted Securities and Exchange Board of India
from attempting to increase the stake of the				(‘SEBI') which recently relaxed the SEBI
controlling shareholder, value-destroying scorched				(Substantial Acquisition of Shares and Takeovers)
earth tactics may be the only effective takeover				Regulations, 1997 (‘SEBI Takeover Code') which
defences available to susceptible Indian companies				governs the takeovers of listed companies in India.
today.				Techniques used in raids are such as Techniques of
Indian policymakers face an important regulatory				raid takeover bid and tender offer. The procedure
opportunity. While the government has made the				for organizing takeovers includes collection of
decision to permit foreign hostile takeovers,				relevant information and its analysis, examine
regulators still have discretion to decide the extent to				shareholders' profile, investigation of title and
which the free market for corporate control its				searches into indebtedness, examining of articles of
policies currently permit is desirable for its companies,				association etc,. Defence against takeover bid may
investors, and other stakeholders. However they				be in the form of advance preventive measures for
come out on this important policy decision, Indian				defence such as - joint holdings or joint voting
regulators should ensure that, unlike under the current				agreement, interlocking shareholdings or cross
scheme, they make their policy intentions on hostile				shareholdings, issue of block of shares to friends and
takeovers clear through explicit regulation and policy				associates, defensive merger apart from other things.
statements in the Takeover Code. Moreover, India's				Tactical defence' strategies include friendly purchase
securities regulator, SEBI, adopt a principles-based				of shares, emotional attachment, loyalty and
standard in the Takeover Code that would prevent				patriotism, recourse to legal action, operation
the kind of pernicious scorched earth tactics and				‘White Knights', "Golden Parachutes" etc,.
embedded contractual defenses that may otherwise				Four basic tactics or schemes can be carved out
proliferate given the absence of more traditional				when we study the practice of corporate raiding
takeover defenses[2].				which are bankruptcy, corporate, litigation, and land
Scope of Takeovers & Takeover Regulations:				schemes to be the most widespread apart from
The term ‘takeover' is nowhere defined in the				the other supplementary tactics such as the creation
Companies Act 1956 (Act) or in Securities and				and presentation of false evidence in civil litigation. At
Exchange Board of India Act 1992 (SEBI Act), or in				least three causes can be identified, first is the
SEBI (Substantial Acquisition of Shares and				general uncertainty of property rights resulting from
Takeovers) Regulations 1997 (takeover Code). In the				the privatization of state assets, second cause is
absence of a legal definition, the term takeover has				poor corporate governance and final cause of raiding
to be understood from its commercial usage. In				is the fact that the legal system is simply not yet
commercial parlance, the term takeover denotes the				equipped to deal with this novel form of crime. The
act of a person or group of persons (acquirer)				court structure, the inadequacy of criminal law, the
acquiring shares or acquiring voting rights or both of a				flaws in criminal investigation, the problems of good
company (target company), from its shareholders,				faith purchaser and the verification of corporate
either through private negotiations with majority				documents are also among the loopholes that can be
shareholders, or by a public offer in the open market				identified. In order to address this problem, a new
with an intention to gain control over its				bankruptcy law must be imposed with more stringent
m:friagement. Thus, the term ‘takeover' may be				screening and ethical requirements for trustees,
described as the process whereby the majority of				expanding the time for judges to consider and take
the voting capital of a company is bought through				decisions, and also expand debtors' rights to contest
secret acquisition of shares or through a public offer				creditors' petitions.
to the shareholders. A takeover is considered				The corrupt acquisition of control over the target
‘hostile' when the management of the target				company usually by falsifying internal corporate
company resists the attempted takeover.				documents and/or corruptly obtaining control over a
Likewise the expression ‘acquisition' is also not				significant portion of the voting stock or the board of
defined in any of the statutes referred above.				directors of the target company is common in nature.
Generally, an acquisition denotes the purchase of				The raider may create a false power of attorney or
shares of a target company. When such a purchase				other document authorizing him or a co-conspirator
of shares is with an intention to take control of the				to enter into transactions on behalf of the target
target company, such an acquisition becomes a				company and then transfer the target's assets to
takeover. Therefore, irrespective of whether there is				himself or affiliated companies or the raider bribes
a takeover of a company' or not, acquisition of				officials at state registration agencies to alter the
shares occurs whenever shares of the target				target company's registration documents to give him
company changes hands. However, these two				and/or his confederates faux control over the target
expressions are synonymously used in takeover				company. He then uses this control to drain off the
transactions[3].				target's assets[18].
Takeover implies acquisition of control of a company				Another important tactic that may be used by raider
which is already registered through the purchase or				is the creation and presentation of false evidence in
exchange of shares. Takeover takes place usually by				civil litigation. For example, in answering claims by
acquisition or purchase from the shareholders of a				victims, raiders typically offer false evidence, such as
company their shares at a specified price to the				fabricated contracts and corporate resolutions, to
extent of at least controlling interest in order to gain				"prove" the alleged legitimacy of their acquisitions.
control of the company[4].				There are certain measures that businesses can take
Takeover is a business strategy of acquiring control				to protect themselves. These measures include
over the management of the target company-either				retaining qualified legal counsel to draft and review all
directly or indirectly. The motive of acquirer is to gain				incorporation documents and contracts, retaining
control over the board of directors of the target				corporate investigation firms to investigate partners
company for synergy in decision-making. The eagle				and major customers, and, above always complying
eyes of raiders are on the lookout for cash rich and				with all relevant laws and regulations[19].
high growth rate of companies with low equity stake				The term ‘takeover' is nowhere defined in the
of promoters.				Companies Act 1956 (Act) or in Securities and
Despite their prominence elsewhere, hostile				Exchange Board of India Act, 1992 (SEBI Act), or in
takeovers have been largely alien to Indian listed				SEBI (Substantial Acquisition of Shares and
companies that have rarely witnessed raids by hostile				Takeovers) Regulations, 1997 (Takeover Code). In
acquirers. This may lead one to believe that the				the absence of a legal definition, the term takeover
Indian legal system – with the SEBI (Substantial				has to be understood from its commercial usage. In
Acquisition of Shares and Takeovers) Regulations,				commercial parlance, the term takeover denotes the
2007[5] (the Takeover Code) being the legislation on				act of a person or group of persons (acquirer)
point - is friendly to incumbent shareholders and				acquiring shares or acquiring voting rights or both of a
management and is unfriendly to raiders. However, a				company (target company), from its shareholders,
reading of the Takeover Code would reveal that it				either through private negotiations with majority
does not prohibit hostile takeovers, and even more, it				shareholders, or by a public offer in the open market
in fact imposes various restrictions on incumbent				with an intention to gain control over its
promoters and management once an open offer is				management. A takeover is considered ‘hostile'
made, thereby enhancing the leverage available to				when the management of the target company
the hostile acquirer.				resists the attempted takeover.
An acquisition of shares of a listed target company is				The basic principle is that when acquisition becomes a
governed, inter alia, by the Companies Act, the SEBI				takeover, the Takeover Code becomes applicable
Act and the Takeover Code. Such an acquisition is				besides other provisions of the Act. In other words,
also subject to the intervention and supervision of				in case of a takeover, compliance of both the
the Securities and Exchange Board of India (SEBI). In				Takeover Code as well as that of the Act is
respect of acquisition of shares of other target				necessary, while in case of acquisition, compliance of
companies, the governing law is contained in S. 108 of				only the Act is required. Further, if an acquisition
the Act, where the transfer of shares takes place on				results in a ‘combination', then the provisions of
the basis of mutual agreement between the parties				the Competition Act 2002 also become applicable,
without any intervention of external authorities.				and the approval of the Competition Commission of
However, if the acquisition of shares in these				India is required. If the acquisition results in either
companies results in the acquirer gaining control over				inflow or outflow of funds, to or from India, then the
the management of a listed company, the provisions				provisions of the Foreign Exchange Management Act
of the Takeover Code shall apply to such an				1999 would become applicable and in such a case, the
acquisition.				permission from either the Reserve Bank of India or
First is the Takeover Code, which as discussed				the Central Government may be required.
above does not present any direct hindrance to				The objective behind the Takeover Code is to bring
hostile acquisitions. Second is the foreign investment				transparency in takeover and acquisition transactions
policy of the Government of India and the Reserve				in public listed companies and to ensure that if
Bank of India (RBI) that deal with acquisition of				minority shareholders are not given a raw deal
shares by foreign acquirers. Even these have been				through price fixation. The Takeover Code lays down
largely liberalised in 2006 (by a Press Note – the				the mandatory and compulsory disclosure of an
relevant paragraph is 2e) enabling foreign acquirers to				acquisition if the acquirer intends to do. The
buy shares in Indian companies without the approval				procedure in case an investor wants to takeover has
of the Foreign Investment Promotion Board (FIPB) or				been clearly laid down in the Companies Act, 1956,
the Reserve Bank of India (RBI) even in case of an				the Takeover Code etc,. These regulatory
unsolicited offer made under the Takeover Code.				mechanisms also lays down the offences, penalties in
Foreign acquirers may buy shares in Indian companies				case of any violation, obligations and restrictions upon
without prior approvals, except in specified sectors or				the merchant bankers, acquirers, the company itself
where sectoral caps are exceeded, so long as the				etc,. Acquisition for the purpose of combination is not
price is at or above the prevailing market price of the				only the acquisition of shares or voting rights or
shares[6].				control of management, but also acquisition of or
The basic principle is that when acquisition becomes a				control of assets of the target company. Thus, for
takeover, the Takeover Code becomes applicable				the purposes of Competition Act, 2002, acquisition of
besides other provisions of the Act. In other words,				shares, voting rights, assets and control of
in case of a takeover, compliance of both the				management have to be considered. In Any
Takeover Code as well as that of the Act is				combination that would result in appreciable adverse
necessary, while in case of acquisition simplicitor,				effect on competition, within the relevant market in
compliance of only the Act is required.				India, would be declared null and void and such an
Further, if an acquisition results in a				effect is to be enquired by the CCI for which the
‘combination'[7], then the provisions of the				powers and the procedure is laid down under the
Competition Act 2002 also become applicable, and				Competition Act, 2002.
the approval of the Competition Commission of India				However, the era of the corporate raider appears to
is required. If the acquisition results in either inflow or				be largely over. In the later 1980s the famous raiders
outflow of funds, to or from India, then the				suffered from a number of bad purchases that lost
provisions of the Foreign Exchange Management Act,				money (for their backers, primarily) and the credit
1999 (FEMA) would become applicable and in such a				lines dried up. In addition, corporations became more
case, the permission from either the Reserve Bank				adept at fighting hostile takeovers through
of India or the Central Government may be required.				mechanisms such as the poison pill. Finally the overall
Thus, in case of acquisitions, the applicable laws and				price of the stock market increased, which reduced
regulating authorities may involve all of the above or				the number of situations in which a company's share
some of them, as the case may be.				price was low with respect to the assets that it
Corporate Raiding:				controlled[20].
A corporate raid is a business term for buying a large				Possible Remedial Measures:
interest in a corporation and then using voting rights				Clearly, raiding will continue as long as there is
to enact measures directed at increasing the share				corruption and loop hole in the law enforcement. But,
value, sometimes also referred to as breaking a				in the meantime, there are steps that could be taken
company[8]. It describes a particular type of hostile				to alleviate the problem:
takeover in which the assets of the purchased				- Create mechanisms allowing for the rapid exchange
company are immediately sold off. The target				of evidence in courts.
company essentially disappears in the process. The				- Pass legislation specifically criminalizing raiding and
measures might include replacing top executives,				establishing specialized task forces to investigate and
downsizing operations, or liquidating the company.				prosecute raiding cases.
Management of many large publicly traded				- Strengthen criminal penalties for the presentation of
corporations reacted negatively to the threat of				false evidence in civil cases and create a mechanism
potential hostile takeover or corporate raid and				allowing courts to refer cases of suspected
pursued drastic defensive measures including poison				falsification to law enforcement for rapid adjudication.
pills, golden parachutes and increasing debt levels on				- Amend the Criminal Code to allow for criminal
the company's balance sheet. In later years, many of				prosecution of legal entities[21].
the corporate raiders would be re-characterized as				- Create legal mechanisms for obtaining and using
"activist shareholders"[9].				cooperating witness testimony in court.
This can be a profitable exercise if the company				- Pass legislation allowing for the recovery, in civil
holds disposable assets or liquid investments that are				litigation, of assets from good faith purchasers who
valued higher than the company's current market cap.				had reason to know that the assets they purchased
Examples would include companies holding valuable				were fraudulently acquired by the seller.
land or equipment, while their stock price is too low				- Require registering officials to check and
due to market factors. After taking a "hit" on their				authenticate documents presented to the Registrar
stock price for whatever reason, companies can				of Companies that purport to reflect changes in
become targets for a leveraged buyout[10].				corporate structure.
Although the "corporate raider" moniker is rarely				- Idly watch the corporate raider continue to
applied to contemporary private equity investors,				purchase stock.
there is no formal distinction between a "corporate				- Make the company less financially attractive by
raid" and other private equity investments acquisitions				selling profitable units or taking on unnecessary Debts.
of existing businesses[11]. The label was typically				- Seek a "white knight" to purchase the company on
ascribed by constituencies within the acquired				friendlier terms.
company or the media. However, a corporate raid				- Pay the belligerent raider substantial sums of money
would typically feature a leveraged buyout that				not to purchase any more company stock.
would involve a hostile takeover of the company,				[1]
perceived asset stripping, major layoffs or other				[2]
significant corporate restructuring activities.				[3] Seth Dua & Associates, Joint Ventures
Additionally, the threat of the corporate raid would				& Mergers and Acquisitions in India—Legal and
lead to the practice of "greenmail", where a				Tax Aspects, 2006 Edn., LexisNexis Butterworths
corporate raider or other party would acquire a				Wadhwa Publications.
significant stake in the stock of a company and				[4]
receive an incentive payment (effectively a bribe)				[5]
from the company in order to avoid pursuing a hostile				[6]
takeover of the company. Greenmail represented a				[7] Competition Act 2002, Section 5: The acquisition
transfer payment from a company's existing				of one or more enterprises by one or more persons
shareholders to a third party investor and provided				or merger or amalgamation of enterprises shall be a
no value to existing shareholders but did benefit to				combination of such enterprises and persons or
existing managers. The practice of "greenmail" is not				enterprises, if— (a) any acquisition where— (i)
typically considered a tactic of private equity				the parties to the acquisition, being the acquirer and
investors and is not condoned by market participants.				the enterprise, whose control, shares, voting rights or
Among the most notable corporate raiders of the				assets have been acquired or are being acquired
1980s were Carl Icahn, Victor Posner, Nelson Peltz,				jointly have,— (A) either, in India, the assets of
Robert M. Bass, T. Boone Pickens, Harold Clark				the value of more than rupees one thousand crores
Simmons, Kirk Kerkorian, Sir James Goldsmith, Saul				or turnover more than rupees three thousand crores;
Steinberg and Asher Edelman. Carl Icahn developed a				or (B) in India or outside India, in aggregate, the
reputation as a ruthless corporate raider after his				assets of the value of more than five hundred million
hostile takeover of TWA in 1985. The result of that				US dollars or turnover more than fifteen hundred
takeover was Icahn systematically selling TWA's				million US dollars; or (ii) the group, to which the
assets to repay the debt he used to purchase the				enterprise whose control, shares, assets or voting
company, which was described as asset stripping. In				rights have been acquired or are being acquired,
1985, Pickens was profiled on the cover of Time				would belong after the acquisition, jointly have or
magazine as "one of the most famous and				would jointly have,— (A) either in India, the assets
controversial businessmen in the U.S." for his pursuit				of the value of more than rupees four thousand
of Unocal, Gulf Oil and Cities Services. In later years,				crores or turnover more than rupees twelve
many of the corporate raiders would be				thousand crores; or (B) in India or outside India, in
re-characterized as "Activist shareholders". Many of				aggregate, the assets of the value of more than
the corporate raiders were onetime clients of Michael				two billion US dollars or turnover more than six billion
Milken, whose investment banking firm Drexel				US dollars; or (b) acquiring of control by a person
Burnham Lambert helped raise blind pools of capital				over an enterprise when such person has already
with which corporate raiders could make a legitimate				direct or indirect control over another enterprise
attempt to take over a company and provided				engaged in production, distribution or trading of a
high-yield debt financing of the buyouts[12].				similar or identical or substitutable goods or provision
Corporate raids became the hallmark of a handful of				of a similar or identical or substitutable service, if—
investors in the 1970s and 80s who built up large lines				(i) the enterprise over which control has been
of credit and were able to purchase huge companies				acquired along with the enterprise over which the
for little or no cash, often through the issuance of				acquirer already has direct or indirect control jointly
junk bonds. These corporate raiders gained a				have,— (A) either in India, the assets of the value
reputation for destroying a number of well-run				of more than rupees one thousand crores or
companies, although this may be somewhat				turnover more than rupees three thousand crores; or
overstating the issue[13].				(B) in India or outside India, in aggregate, the assets
Some believe that one side effect of the corporate				of the value of more than five hundred million US
raiding era is that companies are much more				dollars or turnover more than fifteen hundred million
defensive, which many argue is not a good thing for				US dollars; or (ii) the group, to which enterprise
the economy. Others argue that corporate raids				whose control has been acquired, or is being acquired,
prevent corporate managers from becoming too				would belong after the acquisition, jointly have or
complacent and serve to redistribute capital from				would jointly have,— (A) either in India, the assets
lesser sectors to more productive sectors of the				of the value of more than rupees four thousand
economy. In particular, some argue that the apparent				crores or turnover more than rupees twelve
superior performance of American companies in the				thousand crores; or (B) in India or outside India, in
1990s in comparison with German or Japanese				aggregate, the assets of the value of more than
companies arose because the latter companies are				two billion US dollars or turnover more than six billion
protected from corporate raids.				US dollars; or (C) any merger or amalgamation in
Opponents of the corporate raid argue that this				which— (i) the enterprise remaining after merger
typically occurs only to well-run companies who are				or the enterprise created as a result of the
successfully managing their money. In addition, they				amalgamation, as the case may be, have,— (A)
argue that corporate raids cause large economic				either in India, the assets of the value of more than
disruption and create unemployment as factories are				rupees one thousand crores or turnover more than
sold off and closed. Proponents of the corporate raid				rupees, three thousand crores; or (B) in India or
argue that companies which have huge assets and				outside India, in aggregate, the assets of the value
low stock prices are not managing their money well				of more than five hundred million US dollars or
and should either attempt to regain market				turnover more than fifteen hundred million US dollars;
confidence by boosting their share prices or else				or (ii) the group, to which the enterprise remaining
liquidate some of their assets and return the money				after the merger or the enterprise created as a
to their shareholders.				result of the amalgamation, would belong after the
In the early 1980s, a corporate raider would quietly				merger or the amalgamation, as the case may be,
purchase large amounts of a company's undervalued				have or would have,— (A) either in India, the
stock. He (the raider tended to be male) then publicly				assets of the value of more than rupees
announced hisintent to buy a controlling interest in the				four-thousand crores or turnover more than rupees
company, creating a demand for the company's				twelve thousand crores; or(B) in I ndia or outside
stock where none previously existed. The corporate				India, the assets of the value of more than two
raider railed against what he considered to be a				billion US dollars or turnover more than six billion US
group of incompetent managers and proposed hiring				dollars. Explanation.— For the purposes of this
more capable executives for the good of				section,— (a) "control" includes controlling the
shareholders. The entrenched managers didn't think				affairs or management by—(i) one or more
themselves incompetent. Wanting to protect their				enterprises, either jointly or singly, over another
own jobs and careers, they countered with a				enterprise or group; (ii) one or more groups, either
doomsday takeover scenario in hopesthat				jointly or singly, over another group or enterprise; (b)
shareholders would remain loyal to them. Based on				"group" means two or more enterprises which,
rather solid historical evidence, management predicted				directly or indirectly, are in a position to — (i)
that the corporate raider would drastically cut costs,				exercise twenty-six percent. or more of the voting
selfishly pocketexcess cash, transfer the most				rights in the other enterprise; or (ii) appoint more
profitable units to another firm in the raider's stock				than fifty percent, of the members of the board of
portfolio, sell other units to the highest bidder,				directors in the other enterprise; or (iii) control the
liquidate the remains, and, in the process, disrupt				management or affairs of the other enterprise; (c)
thelives of dedicated employees and community				the value of assets shall be determined by taking the
members. Many raiders pursued such strategies				book value of the assets as shown, in the audited
because the company's individual parts were worth				books of account of the enterprise, in the financial
more than the whole of the organization.[14]				year immediately preceding the financial year in which
Stockholders enjoyed a financial windfall while the				the date of proposed merger falls, as reduced by
corporate raider and managers battled for their				any depreciation, and the value of assets shall include
hearts, minds, and wallets. The price of the				the brand value, value of goodwill, or value of
company's previously stagnant stockincreased				copyright, patent, permitted use, collective mark,
dramatically as more people wanted the premium				registered proprietor, registered trade mark,
price the raider would have to pay to obtain a				registered user, homonymous geographical indication,
controlling interest in the company. Although the				geographical indications, design or layout-design or
higher stock price madethe company a more				similarother commercial rights, if any, referred to in
expensive takeover target, the corporate raider,				sub-section (5) of section 3.
who already owned a substantial amount of stock,				[8]
saw the value of his stock portfolio shoot				[9]
upward[15].				[10]
After management's appeal to shareholders not to				[11]
sell stock to the raider fell on deaf ears as was often				[12] Supra note 8.
the case managers sought a "white knight" willing to				[13] Edwards Rolph James, Corporate Raiders and
buy substantial shares of stock under more friendly				Junk Car Dealers: Economics and the Politics of
conditions. This typically included the continued				Merger Controversy, The Journal of Libertarian
employment of the current management team. Or,				Studies, Vol IX, No. 2 (Fall 1990).
managers could make the company				[14] Supra note 8.
financiallyunattractive to the corporate raider by				[15] RAIDERSBehaving Badly PDF.
either selling off the most highly prized assets or				[16]
taking on massive debt[16].				[17] Supra note 8.
At this point in the poker game, the corporate raider				[18] FIRESTONE, THOMAS, "Criminal Corporate
cashed in his chips. The white knight or winning				Raiding in Russia," ABA Journal, June 2009.
management team would pay the raider a premium				[19] Ibid.
stock price, referred to as "greenmail," just to get rid				[20] Supra note 8.
of him. In the end, the raider increased his wealth,				[21] Supra note 18.
which is what it was all really about in the first place.

VentureInc.

Corporate Raiding In India