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Because Steven and Mitchell Rales are as tightlipped as they are rich, it's easy to mistake them for something they aren't. There was, for example, that morning in 1986 when stocky, dark-haired Mitch came across as the typical brash corporate raider as he stood outside the Manhattan offices of Chicago Pneumatic Tool, a company for which he and his brother Steven had just mounted a successful $163 million hostile takeover bid. The night before, a court decision had installed Mitchell as president of the company, but the old management wasn't ready to hand over the reins. So Mitchell launched what his then-attorney, Robert Zimet of Skadden Arps Slate Meagher & Flom, recalls as a "fiscal invasion."
"Management wasn't prepared for an orderly transition," Zimet says. "So the next morning, we marched over there, walked in, and said we needed some space to start working on the changeover. They showed us to a dusty, musty conference room in a storage area, and told us we could operate there. Mitch said, 'Where's the president's office?' The fellow who had described himself as the board's representative said, 'That's my office.' 'Where is that?' Mitch asked. The man told him it was on the ninth floor. Mitch said, 'That's where we're going.'
"So we went up there, and Mitch said to the man who'd been the president, 'Where's your desk?' The man said, 'Right here.' Mitch went in and sat down at it. This was done with civility--no yelling or raising of his voice, no physical contact. Just the unambiguous determination to exercise the prerogative the court had given him. Meanwhile, I called the former president's lawyer and told him that his client wasn't being helpful. Eventually, he just left."
In those days, a lot of people thought the Raleses were callow corporate buccaneers, leveraging themselves to the eyeballs with junk-bond and bank debt so they could pillage smokestack America. In an era when the press mistook Trumpian swagger as a sign of business acumen, the Raleses were stereotyped as bland, provincial imitators of the corporate big boys; Forbes mocked them as "raiders in short pants."
That image was reinforced in 1988, when the brothers startled Wall Street with an unsuccessful $2.7 billion hostile takeover bid for the St. Louis-based conglomerate Interco, which owned such American brands as Ethan Allen furniture and Converse sneakers. The deal looked like your basic 1980s greenmail; the Raleses financed their raid with bank loans and junk bonds from Mike Milken's Drexel Burnham Lambert and, ultimately, walked away with $75 million in go-away money, while management's effort to fight them off helped drive Interco into bankruptcy.
But in retrospect, the Raleses deserve more respect. On the parched playing field of the 1990s, the flashy wheeler-dealer types have gotten sacked for big losses. The mild-mannered brothers, however, have plowed into the end zone again and again. Danaher Corporation, the Georgetown-based flagship company that they built from the ruins of a near-bankrupt real estate trust they acquired in the early '80s, has grown into a Fortune 500 industrial conglomerate that employs more than 7,000 workers in thirteen states and three foreign countries and last year topped $1 billion in sales. Steve, 43, and Mitch, 38, have become two of the richest men in Washington.
They have made their money the old-fashioned way: they buy companies that make things, and then they make those firms more profitable. They acquire boring little companies that churn out unglamorous products--wrenches, braking devices for truck engines, monitoring systems for underground storage tanks--and turn them into goldmines.
With Danaher's stock trading in the mid-40s in October--an all-time high--the …