There was a relatively small aspect to Milken’s business that later helped dislodge less-efficient, non-stockholder managers as part of the normal process of business rationalization: takeovers. These takeovers served to improve the quality of management at less-efficient companies, and to help the economy, making both more dynamic and innovative. In a June 26, 2002, opinion column, dean of the George Mason School of Law, Henry G. Manne, called takeovers "the most powerful market mechanism for displacing bad managers ... just the threat of a takeover provides incentive for managers to run companies in the interest of the shareholders." Professor Manne called the supposed abuses of takeover activity "largely mythical."
Investment banker Roy C. Smith, who worked for Goldman Sachs – a Drexel competitor – wrote approvingly in his 1990 book, Money Wars, about the "new men" of Wall Street who in the 1980s came to "shake American corporations out of their torpor and waste."
The editor of Canada’s National Post wrote (August 2002):
In an October 2005 column for another Canadian newspaper, The Globe and Mail, columnist Eric Reguly wrote:
Michael C. Jensen of Harvard Business School has frequently cited the positive productivity effects for shareholders and society of takeovers that discipline large inefficient firms. In a 1992 Journal of Applied Corporate Finance article, he explained why this was necessary:
A February 2008 Washington Post column by Steven Pearlstein said:
Writing in The American Spectator [June 2005], Stephen Moore, former senior economist of the Congressional Joint Economic Committee, wrote:
An article in the Sunday Times of London (May 13, 2007) said:
These takeovers were an important trend and clearly helpful to the economy, but what has been overlooked by press accounts is that they were merely a natural outgrowth of Milken’s revolution in capital access for entrepreneurs with ability. That revolution broke the stranglehold of the 'Establishment' lenders and shifted power from non-stockholder corporate managements to stockholders. This led to enormous job creation by the 99.9% of small- and medium-size firms that are not "investment grade" and are usually managed by owners. These companies created 62 million jobs in the last 30 years of the 20th century, while the Fortune 500 'investment grade' firms laid off more than four million. Meanwhile, all of Europe, with twice the population of the U.S. in 1970, created only about 12 million jobs in the same period. Europe did not yet have the advantage of Milken’s revolution. When his innovations began to be adopted in the U.K. in the 1990s, the U.K. economy robustly pulled away from continental Europe, and its unemployment rate dropped from more than 10 percent to around four percent.
An article in The Economist magazine (September 23, 2006) recognized the advantage that Milken’s innovations gave the U.S. over Europe: "In the days of Michael Milken and Drexel Burnham Lambert in the 1980s, junk bonds helped reshape and modernize corporate America, no matter how unpopular they were at the time."
But Milken underestimated the political clout of corporations with bloated management structures that suddenly found themselves obliged to compete with vigorous new players. There was a strong reaction from the established financial community, through their Congressional representatives and editorial pages of major newspapers. Rather than credit Milken for enlivening an economy gone dormant, they attacked him as an enabler of "raiders" who were "destroying America." Politicians to whom these corporations made large contributions, and the publishers in whose papers they bought substantial advertising, were quick to join the chorus.
As the late U.S. Senator Daniel Patrick Moynihan said, "We are all entitled to our own opinions, but not to our own facts." One fact often overlooked by the press is that takeovers were not a large part of Milken’s two decades on Wall Street. And because the public had a poor understanding of takeovers, they were a convenient target for the corporate old-boy network to use in shifting attention from their own shortcomings. According to a March 4, 1992, article in The Wall Street Journal, "Junk bonds have been blamed for takeovers, yet they provided no more than 5% of takeover financing." Ironically, most takeover financing was provided by banks, not the capital markets.