(FORTUNE Magazine) – WHEN GENERIC DRUGMAKER MYLAN Laboratories unveiled plans last summer to buy King Pharmaceuticals in a $4 billion deal, it didn't garner much attention. But it did catch one person's eye--Carl Icahn's.

Labeling the merger "stupid," the billionaire financier quickly snapped up a 9.8% stake in Mylan. He has since planned a proxy battle to kill the deal, made an offer to buy the company, and sued a hedge fund that dared to get in his way. In a sense, it's vintage Icahn: raw, ugly, and a boon to those teams of lawyers now gainfully employed.

But in other ways the Mylan deal shows how the feisty Icahn, 68, is modifying his strategy. In the 1980s, Icahn made his name (and much of his fortune) targeting giant but troubled brand-name firms like RJR Nabisco, Texaco, and TWA. He'd snap up a big stake and then agitate management and shareholders into his way of thinking (which in many cases involved paying Icahn to go away or breaking up the company and selling off the pieces at a handy profit to him). In some of his more recent maneuvers, though, Icahn is targeting much smaller firms. Plus he's waiting until after a merger is announced before he swoops in and starts to shake things up. (He also recently jumped into another deal, backing Blockbuster's potentially hostile bid for Hollywood Entertainment.)

Icahn wouldn't be interviewed for this story, but observers note that he could be targeting smaller companies simply because it takes much less capital to buy a big stake in a little company and then make enough noise to move its stock. And Icahn's notoriety has made it somewhat tougher for him to get other shareholders to agree with his plans.

In the Mylan/King deal, it's likely Icahn believed investors were peeved enough at Mylan management to side with him and scuttle the merger. Indeed, King is a bit of a mess (it has had to restate its earnings and is under SEC investigation). Yet this deal has proved far from a slam-dunk. What Icahn may not have predicted is how far other players in this deal would go to protect their interests. The merger attracted numerous hedge funds that are betting the deal will happen. One of them, Perry Capital, has gone so far as to take a 9.9% stake in Mylan--almost exactly the same as Icahn's--and then hedge it completely. Perry wouldn't comment for this story about its intentions, but the move is clearly made to provide a risk-free way to block Icahn's vote in the deal. "It doesn't appear to be illegal but, we have to say, it's distasteful," says Chris Young, a senior mergers analyst at Institutional Shareholder Services. Icahn filed a $1 billion lawsuit against Perry and hired power-lawyer David Boies.

Icahn, as always, insists that he's only trying to hold management accountable and that he's a shareholder activist--a voice for the little guy. Others are less generous. "Carl Icahn's record is very much about him acting on behalf of himself," says Nell Minow of the shareholder advocate group Corporate Library. Indeed, in the Mylan/King deal, the question might be, Who's protecting the shareholders from the activists? "We're trying to focus on the long-term value that can be created by this deal," says Ed von der Linde of mutual fund group Lord Abbett & Co., which has held Mylan stock for four years. "Interlopers like Icahn say they're working for shareholders, but we've never even had a conversation with him."

Whatever happens with Mylan, expect to hear more from Icahn. He's in the process of raising $3 billion for his own hedge fund. With that kind of money to invest, Icahn is just getting warmed up. -- Julie Creswell