CORPORATE RAIDERS Original

CORPORATE RAIDERS
A person or a company that is offering or executing a hostile

takeover by buying shares directly from shareholders.
If a firm makes an offer to shareholders to acquire a publicly
traded company after the board of directors refuses, or if
bypasses the board completely, one refers to the acquiring firm as
a corporate raider.
Often, the corporate raider does not actually intend to takeover
the target company, but simply trying to force the board of
directors to repurchase shares at premium to their market value.
In other words, corporate raiders create environment of threat of
take over and force the target company to buy back at premium.
These are countered by
 Poison Pills – It is defined as any corporate provision
or strategy, that is used by a company to protect itself
from a hostile takeover bid : the term originated from the
world of espionage, where spies were instructed to
swallow as a poisonous pill rather than risk capture.
These are defensive techniques have evolved over
time, and while this strategy may take several forms, the
most common structures include:
Poison Pills Provisions
oPreferred stock plans
oFlip over plans
o Flip in plans
o Back end plans
o Poison puts
 Golden Parachute- This strategy means including

provisions in the employment contracts of top
executives which will require a large payments to key
executive if the organization is takeover. Therefore,
this strategy may not be sufficiently effective on its
own but will make the acquisition target less attractive.
People Pills- The target company’s management team
threatens that, in the event of a takeover, the entire team will
resign. The purpose of people pill is to discourage the
acquiring company from completing the takeover, by
introducing the possibility of having to put together an entirely
new management team.
 White Knight & White Squire- These two defensive measures
require and involve a third party. In first, the targeted firm seeks
for a friendly firm which can acquire a majority stake in the
company and is therefore called white knight. With a white knight
the management of the target company can negotiate several
deals. White squire acquires a smaller portion, but enough to
hinder to hostile bidder from acquiring a majority stake and
thereby fending off an attack.
 Sand Bag- A tactic used to hide or limit the expectations of the
company or individual strength in order to produce greater than
anticipated results.
Corporate Governance Ratings
Corporate governance ratings (CGR) is meant to indicate
the relative level to which an organization accepts and
follows the codes and guidelines of corporate governance
practices.
The corporate governance practices prevalent in a
company reflect the distribution of rights and responsibilities
among different participants in the organization such as
• Board
• Management
• Shareholders, and
• Other financial stakeholders, and the rules and procedures
laid down and followed for making decisions on corporate
affairs.
Various corporate governance
ratings agencies:
 ICRA LIMITED
CRISIL
 FITCH RATINGS
CARE
ICRA (Investment Information and
credit rating agency of INDIA)
• Set up in 1991 by financial institution, commercial banks and financial
companies.
• ICRA is a Public Limited Company, with its shares listed on the Bombay
stock exchange and the National Stock Exchange.
• The Emphasis of ICRA’S Stakeholder value and governance (SVG)
Ratings , on the other hand, Value Creation and value management for
all stakeholders of a company , besides the company’s corporate
governance practices.
• ICRA’s CGR and SVG Ratings may help the rated corporate entity in
raising funds, listing on the stock exchange , dealing with third parties like
• Creditors
•Providing comfort to regulators,
•Improving valuation ,and better corporate governance practices through
benchmarking.
MAJOR FACTORS FOR ANALYSIS
 Ownership Structure
 Governance structure and management processes
 Board structure and processes
 Stakeholders Relationship
 Transparency and Disclosures
 Financial Discipline
 Ethical Practices
The Rating Scales Used By ICRA
 SVG 1 : HIGHEST CATEGORY

 SVG 2 : HIGH CATEGORY
 SVG 3 : ADEQUATE CATEGORY
 SVG 4 : MODERATE CATEGORY
 SVG 5 : UNSATISFACTORY CATEGORY
 SVG 6 : LOWEST CATEGORY
CRISIL(CREDIT RATING INFORMATION
SERVICES OF INDIA LIMITED)
 CRISIL GVC (governance and value creation) Ratings
assess corporate governance practices at a company with
respect to their impact on all shareholders who deal with the
company, such as
Company ,Suppliers ,Shareholders ,Lenders and Society.
A CRISIL GVC rating indicates the capability of the entity with

respect to creating wealth for all its stakeholders, while
adopting sound corporate governance practices.
THE RATING SCALES USED BY
CRISIL
 CRISIL GVC LEVEL 1 : HIGHEST
 CRISIL GVC LEVEL 2 : VERY HIGH
 CRISIL GVC LEVEL 3 : HIGH
 CRISIL GVC LEVEL 4 : ABOVE AVERAGE
 CRISIL GVC LEVEL 5 : AVERAGE
 CRISIL GVC LEVEL 6 : BELOW AVERAGE
 CRISIL GVC LEVEL 7 : LOW
 CRISIL GVC LEVEL 8 : LOWEST

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CORPORATE RAIDERS

A person or a company that is offering or executing a hostile

 Golden Parachute- This strategy means including

 SVG 1 : HIGHEST CATEGORY

A CRISIL GVC rating indicates the capability of the entity with

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