The Way it was: 1988.

Rule No. 1 in the Takeover Game

I was in western Canada on a long-deferred fishing trip with my 12-year-old son in August 1985, and was returning home the day Hanson tendered for SCM. When I got back to New York my wife had two things to say to me. First, "What am I supposed to do with all that fish?" And second, "Call the office." In a few phone calls that evening, I learned that Hanson Trust had announced a $60-pershare all-cash tender offer for SCM, which was then selling at $55. The stock closed that day, even before the offer was actually made, at $63. So it was clear Wall Street was betting that someone would offer more. It was also apparent that, one way or another, SCM was never, ever going to be the same again. And I think that's Rule No. 1 in the takeover game: If someone makes an all-cash, any-and-all-shares tender offer, and they've got any kind of reputation to back it up, you know that company is going to be sold to someone. The question becomes: to whom, and what degree of control will you have in that determination?

D. George Harris, former president of SCM Corp., in "'This Can't Be Happening': The Takeover of SCM" [Spring 1988]. He subsequently founded a private equity firm to make investments in the chemical industry.

Impact of the Raiders

According to Harvard economist Michael Jensen, we owe a great deal of gratitude to the raiders. The restructurings they have caused have added billions to the stock market. And all this new value placed on restructured companies is equivalent to resources liberated from the control of wasteful managers -- resources now able to move more quickly to their highest-valued uses.

But how about the long term? Does this dealmaking result in a strengthening of America's future productivity? To hear Jensen tell it, the deals usually siphon resources away from companies whose investments in research and other future-oriented activities are weak and unpromising. But in fact, traders put companies into play simply because they're undervalued enough to generate big stock market gains. And undervalued companies may or may not be the ones with weak future-oriented programs. If all the undervalued companies are fair game for raiders, what's the result for future-oriented programs in our economy? The impact of the raiders might be compared to that of a bad storm that causes devastation near its center and less intense but very widespread destruction at its outer reaches.

Edward Hennessy Jr., chairman and CEO of Allied-Signal Inc., in "The Ethics of Corporate Restructuring" [Fall 1988]. He retired from the company in 1991. Allied-Signal, under Hennessy's successor Larry Bossidy, was merged into Honeywell Inc. in...