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Carl Icahn

Apollo355 said: "I've always been curious as to what type of leverages these guys use to buy out stocks in companies. I understand that they pool other investors' money, called "private equity funds", but I like to learn about the fundamentals behind that - ie. how do they initially raise capital, and what formulas are involved when buying out large shares of a company, and flipping them at a profit. I would love to hear feedbacks from anyone on here with this knowledge."

ratAphooey said: "Each deal is structured differently and the deals are generally pretty complicated. Like you said: much of it is private equity."

tomtat1 said: "Activist investors like Carl Icon buy large pieces of companies they believe have hidden value. They then convince current management to do things to unlock this hidden value. This could be as major as breaking up the company, or as minor as making the current management more shareholder friendly usually with stock buybacks or increased dividends. If they cannot convince management to effect these changes they either sell and move on, or fight current management for control of the company. I am not sure what avenues Carl Icon uses for raising capital, but given his success I believe he could get capital readily from either private equity or the debt market. He probably has plenty of his own too."

Heather said: "He bought 50 million shares of Yahoo.. he's looking to overthrow the members of the board.."

Apollo355 said: "It sounds like structuring the deal for a buyout is only part of the equation here but how does one raise capital or start a private equity fund? What are some of the avenues to acquire leverage fundings?"

tomtat1 said: "[QUOTE=Apollo355;68696]It sounds like structuring the deal for a buyout is only part of the equation here but how does one raise capital or start a private equity fund? What are some of the avenues to acquire leverage fundings?[/QUOTE] I have not done this but I have a friend that does. This is what he did to get started. This is a long process because you have to develop trust. Start a business and begin exercising your strategy with whatever money you can raise on your own. The scale here isn’t important you are developing a track record. All cities have firms with accountants that specialize in handling the wealth of clients. Become a client of theirs and develop a relationship with at least one partner in this firm. Because they are doing the books for your company, they will know weather your strategy is successful or not. If your strategy is successful and you have earned the trust of the firm they will begin selling you to there other clients. You pay them a commission for the business they bring. It helps with these guys if your strategy has some tax advantages, as a tax efficient investment plan is what these guys are selling to their rich clients (My friend is into commercial real-estate). If you get a group of investors to put money in your hands then it’s all about results. The better you are at growing their money with as little risk as possible the more of their money you will get. Once they feel comfortable with you they will start recommending you to their friends."

saminny said: "The strategies they use should be similar to what me or you or any individual or small investor would use when investing money in the company in the form of ordinary stocks, e.g., aggressive growth potential, under valuation, momentum, or earnings potential. However there are differences. Firstly, they invest it in a company on a much larger scale and have the power to influence the board to make certain decisions. An individual investor would see value in a company but does not have the power to influence the company if it decides to take an alternative route, not in favor of the shareholder. However the big investors have the potential to influence the board into taking a certain route. Secondly, the private equity investors might see an alternative path for a company that is more favorable in the short or long term from its current strategy in which case, they will try to increase their share and influence the board into taking that path. -Sam"