(FORTUNE Magazine) – RUN DOWN THE LIST of the big-time corporate raiders and you might conclude that they're sated or preoccupied. Carl Icahn has just stepped into the pilot's seat at TWA after winning a four-month dogfight for control. Sir James Goldsmith, the Anglo-French financier, is pondering what to do with Crown Zellerbach now that he's accumulated more than half the company's shares. T. Boone Pickens is busily transforming Mesa Petroleum, the launching pad for his many attacks, into a meek-mannered master limited partnership. And Irwin Jacobs is peddling pieces of AMF, the sporting goods manufacturer that fell into his grasp. With so many potential corporate targets erecting poison-pill and other defenses, it might appear that the era of the ''takeover entrepreneur'' has peaked. Before you believe that, however, listen to Irv (''the Liquidator'') Jacobs: ''We're in the process of selling 16 companies right now -- and sure, it takes an hour out of the day. But nothing would please me more than for people to think that the party's over -- and then to wake up one day and find all four of us in the market at the same time.'' Wall Streeters close to the merger action believe the four -- Icahn, Goldsmith, Pickens, and Jacobs -- and other raiders are hungrier than ever. ''For all we know,'' says Stephen Fraidin, a Wall Street lawyer who specializes in mergers and acquisitions for the New York-based firm of Fried Frank Harris Shriver & Jacobson, ''Carl Icahn is in the market right now, quietly buying up his next company.'' The new anti-takeover roadblocks aren't going to scare off well-financed, well-counseled raiders. The defenders can expect little help from Washington, where legislation to erect more takeover barriers is going nowhere. And while the courts have sided with defending managements several times this year, the judicial signals are becoming fuzzier, not clearer. Meanwhile the raiders are finding ways to leap the hurdles. They say they'll even revive an old game -- the proxy fight -- if that's what it takes to pull off a takeover. Money seems the least of the raiders' worries. Each victory brings fresh waves of would-be financial partners seeking to be included next time. And institutional investors, such as pension funds and insurance companies -- long supporters of beleaguered managements -- are increasingly bolting to the raiders' side in a showdown. The raiders' edge is encouraging more players to try the game. ''You're going to see a whole new crowd,'' says Joseph R. Perella, who co-directs the mergers and acquisitions team at the First Boston investment firm, a powerhouse in the field. ''Look at Ron Perelman,'' says Perella, referring to the 42-year-old head of Pantry Pride, a Florida-based retail chain that maneuvered to buy Revlon. ''Most people on Wall Street hadn't even heard of him a year ago.'' Two other faces in the new crowd: Asher Edelman, 45, a New York arbitrager who earlier this year won control of Datapoint, a San Antonio maker of computer and office communications equipment; and Charles Hurwitz, 45, a Houston investor who last year greenmailed Castle & Cooke, the large Honolulu food and real estate company since acquired by Flexi-Van. Hurwitz recently engaged in a hostile takeover battle for Pacific Lumber, a San Francisco lumber producer and welding equipment manufacturer. More foreign raiders, encouraged by prospects for a weaker dollar, could also join the fray. After the September announcement that the U.S. and four major trading partners planned joint action to bring down the value of the dollar, the Kidder Peabody investment firm landed several acquisition-minded European clients and sent a senior partner abroad to shop for other companies looking for takeover advice. Until now Kidder Peabody has been best known for its prowess in helping companies fend off unwanted suitors. The real question, then, is not whether the raiders are still in the game, but where -- and how -- they'll strike. Predicting their specific targets is chancy, since the takeover virtuosi have different objectives. But they are consummate security analysts, in quest of two situations: balance sheets in . need of reshuffling and operations in need of cost-cutting. Balance-sheet plays remain the raiders' favorites. David G. Kay, top takeover man at Drexel Burnham Lambert -- the firm that has advised and financed most sharks -- notes that more and more companies are restructuring their balance sheets so they'll be less tempting. ''They're doing it for themselves before the raiders do it for them,'' says Kay. But plenty of companies, he adds, still sell below breakup value. Especially inviting are companies whose excess cash could catch a raider's eye. Ford Motor Co. and Litton Industries, among others, have piles of cash. Companies with overfunded pension plans, such as Lockheed and Polaroid, are also vulnerable. It's common for a raider to use these assets, just as he might tap a company's unused borrowing power, to help finance the takeover. Industries with lots of valuable real estate assets -- retail and hotel chains -- could also be fertile territory for raiders. For instance, financial analysts say Associated Dry Goods and Allied Stores, big department store chains, operate some marginal stores on prime urban sites that would have greater value if sold or used in other ways. Boone Pickens says he doesn't expect to see another megamerger in the oil industry soon. But sizable companies such as Mobil, Texaco, and Amerada Hess still command stock prices far below the value of their oil reserves. Though Pickens is likely to concentrate on smaller oil companies for now, he says it would be a mistake to write him off as an exploiter of big anomalies: ''Somebody said the other day that Boone Pickens was probably going to get out of the oil industry. Well, that somebody doesn't know what he's talking about.''

Media companies, including RCA, Taft Broadcasting, and Time Inc., publisher of FORTUNE, are widely thought to be potential prey. Raiders continue to like conglomerates. As Jacobs says, ''Buying companies with lots of different assets diversifies my risks.'' Selling off parts of a conglomerate, moreover, can be easier than carving out pieces of a one-product company. (For a closeup of ITT, a conglomerate under siege, see the following article.) Are any industries immune? Raiders have played almost no part in the wave of food industry mergers, in which the acquiring companies are marriage partners mainly intent on buying well-known brand names. That may be the intent of Kohlberg Kravis Roberts & Co., a firm specializing in leveraged buyouts, which in late October made a $4.9-billion bid to take Beatrice Cos. private. Some raiders say that the prices of food stocks, which have soared on merger speculation, are too rich for their tastes. TWO OTHER HOTBEDS of merger activity -- the airline and banking industries -- probably won't attract many takeover entrepreneurs either. Icahn's TWA victory resulted from an unusual situation: unions so loath to let union- busting Frank Lorenzo of Texas Air get control that they negotiated drastic pay cuts and made a deal appealing to Icahn. The regulatory approvals needed to juggle banking assets take too much time to suit raiders. Among obstacles the directors of target companies can erect against raiders, the most daunting is the poison pill. One type works like this: if a raider acquires a company against its wishes, shareholders have the right to purchase stock in the surviving company at half price. For most raiders, that kind of giveaway would be fatal medicine. Pills generally have timerelease provisions that take effect as soon as a raider acquires 20% or so of the target company's stock. Since poison pills have been around for only two years, there isn't much solid evidence on whether they're good or bad for shareholders. Directors are adopting them anyway. In the past two months, RCA, Dart & Kraft, and McDonald's have added the pill. Takeover lawyers say scores of other corporations are waiting for a decision by the Delaware Supreme Court before adopting pills. One key issue is whether directors have the legal right to prescribe a pill without first getting shareholder approval. Some takeover lawyers pooh-pooh the importance of the forthcoming Delaware ruling, which is expected by year-end. Others, including Joseph Flom of Skadden Arps Slate Meagher & Flom, the New York law firm handling the appeal of a lower court's decision okaying the pill, take a different view. Says Flom: ''If the lower court is upheld, it could mark the death of hostile takeovers.'' Flom is being overly dramatic. One of the grand masters of takeover chess matches, he has already devised a way to checkmate the pill. Last spring Crown Zellerbach, a San Francisco forest products company, rebuffed a partial tender offer from Sir James Goldsmith, a Flom client. Goldsmith simply began stalking the company in the stock market, eventually raising his stake to more than 50% and installing himself as chairman. He was able to ignore the pill because Crown Zellerbach's pillmakers designed it to take effect only in the event of an unfriendly merger. Because Goldsmith hasn't consolidated the company with another, shareholders aren't entitled to buy stock in the surviving company at half price. In effect, Goldsmith's majority control and financial staying power turned the pill into a placebo. In an attempt to thwart Ronald Perelman, Revlon came up with a pill last summer that's far more toxic -- both to Revlon and whoever activates it. If a raider acquires 20% of Revlon's stock, the pill automatically gives the company's other shareholders the right to exchange their shares for debt securities issued by Revlon. By the company's admission, the pill, if activated, ''would severely increase Revlon's debt and could eliminate Revlon's equity,'' thus ''severely impairing'' the company's ability to survive. The ''suicide pill,'' as it has been dubbed, could leave the raider holding all the stock in a company that would almost certainly have to be liquidated to pay off its heavy debts. In mid-October Pantry Pride didn't own enough shares to activate the pill, and Revlon was going ahead with plans to split itself up in a three-way leveraged buyout. Raiders believe they can pulverize the pill through proxy fights. Dissidents generally initiate proxy fights by soliciting shareholders' votes or proxies in support of a slate of directors to replace the company's existing board. Since the early 1960s, when cash tender offers became the ploy of choice in unfriendly acquisitions, proxy fights have been out of vogue. For one thing, they can take months and sometimes years. Traditionally attackers have been at a disadvantage. Management generally sets the date for the vote and can spend corporate cash to campaign for its position. A dissident shareholder, on the other hand, foots the bill for his proxy expenses, which can easily top $3 million with heavy litigation and advertising. ''Proxy fights are a tough row to hoe,'' says Boone Pickens, who spent far more than that in his protracted, unsuccessful proxy fight with Gulf Oil in 1984. Despite the difficulties, he believes a lot more proxy fights are on the way. ''If we can educate stockholders about these (management) entrenching devices,'' says Pickens, ''there's a chance to win some.'' The choreography will be somewhat different than in the past. Before a raider mounts a proxy fight, say Wall Street tacticians, it's likely that he $ will purchase as much of the target's stock as he can without activating the pill. Then, if he can't persuade management to put aside the pill and negotiate, he'll call for a proxy vote on a new slate of directors or, more likely, on the pill's removal. HAVING TO STAGE a proxy fight, says Carl Icahn, ''is going to keep a lot of people from entering the game. The same thing would happen if you suddenly changed all the rules of tennis, shrank the court, raised the net, and made players hit every third shot left-handed. A lot of people would quit, but the top 20 players would continue to play.'' Yet for hard-hitters like Icahn -- himself a right-handed tennis player -- the chances of winning a proxy contest are almost certainly better today than at any time in the last 25 years. Not long ago, institutional shareholders, which collectively control about 35% of all publicly traded shares in the U.S., sided unequivocally if not blindly with management. But institutional money managers, whose performance soars on the premium stock prices that acquirers usually pay, are becoming reluctant to give directors the means to make companies impregnable. Though most management-sponsored anti-takeover proposals are still carrying, surveys by the Investor Responsibility Research Center, a nonprofit organization in Washington, indicate that negative votes by institutions are on the rise. Some institutions, most notably Batterymarch Financial Management of Boston, now vote against anti-takeover proposals as a matter of policy. Whether or not raiders resort to proxy fights, they are certain to benefit from speculators' greater role in takeover attempts. Speculators -- ranging from professional arbitragers like Ivan F. Boesky to your cousin who reads a hot tip in the Wall Street Journal -- increasingly live off takeovers, and the raiders know it. ''People say, 'Kill the raiders, they're no good for the economy,' '' says Irwin Jacobs. ''Well, not too long ago I told Carl and Boone that we all ought to go on strike for six months. If you took all the merger speculation out of the market, you wouldn't have a market.'' IF SPECULATORS believe management stands in the way of the highest possible value for their stock, they are going to side with the raider. Indeed, Wall Street sources say takeover speculators and large institutions influenced General Foods' decision to accept Philip Morris's recent takeover offer without a fight. General Foods had no poison pill and didn't try belatedly to & adopt one, perhaps because management realized that many of these owners of big blocks of shares would eagerly accept the Philip Morris bid. A recent court ruling could turn professional takeover speculators into front men for the raiders. In September Hanson Trust PLC, a British conglomerate that has about half its business in the U.S. (FORTUNE, October 14), dropped a tender offer for SCM after the New York company, best known for typewriters, struck a slightly better deal with a leveraged buyout group headed by Merrill Lynch. But within hours of abandoning its tender, Hanson went on a buying spree, snapping up 25% of SCM's outstanding shares from Boesky and a handful of other arbitragers. SCM claimed that Hanson's purchases amounted to an illegal tender offer. The British company, SCM argued, disregarded the Securities and Exchange Commission's rule that all shareholders be treated equally in a tender offer. A federal appeals court disagreed, saying that Hanson didn't have to satisfy that rule because it had dealt only with a small group of ''sophisticated'' investors. The ruling, which has been challenged, could pave the way for raiders to bypass a public tender offer when arbitragers or institutional investors hold controlling blocks of a company's stock. Takeover artists could further improve their hand if the SEC throws out a defense known as the exclusionary self-tender offer. Earlier this year Unocal used that gambit to squelch a hostile takeover attempt by Pickens. Branding Pickens's bid inadequate, Unocal made a far more generous proposal, offering to buy back about a third of its stock by issuing debt securities. Unocal excluded Pickens and his group from the deal, and was upheld in the Delaware Supreme Court. Inveighs Pickens: ''That's just not America, to let a company discriminate against one group of shareholders.'' The SEC apparently agrees: it has proposed rules that would effectively eliminate that defensive move. More than ever, momentum seems to be with the raiders. In the new climate companies' best defense will not be newly devised hurdles with freshly coined names. Even bold restructuring moves, such as Atlantic Richfield's plan to sell its East Coast gas stations and a big refinery, won't necessarily allow management to relax. ''The fact that Arco has done what they have done,'' says Pickens, ''doesn't forever insulate them.'' What company is safe from the next wave of raiding? Answers Pickens: only Exxon.