The letter came to Coleman Raphael's home two weeks ago, a heart-wrenching lament from a longtime employe of Atlantic Research Corp. A few days earlier, ARC, the rocket company that Raphael helped build into one of the glittering success stories of Washington business, had learned it soon would be swallowed up by Sequa Corp., a little-known but cash-rich conglomerate in New York.

Suddenly, a sense of gloom had swept through ARC's headquarters in Alexandria. Many of the firm's 3,800 employes were anxious and, despite official assurances from the soon-to-be new owners, worried about their futures.

"Yesterday, it was almost silent at Atlantic Research," began the employe's letter to Raphael, the chairman of ARC, its former chief executive and now dean of the school of business administration at George Mason University. "Employes tried to avoid the halls, the cafeteria, each other. What little small talk there was centered on laconic survival jokes. ...

"The sudden purchase of our independence dazes me and most of my colleagues. Our feeling of loss is genuine, because you created a unique constellation within this company that we may well never experience and enjoy again. Where else in American business could so many good ideas, so spontaneously, so regularly come from the ranks?"

As he read the letter to a visitor in his office on the GMU campus in Fairfax last week, Raphael could not help but be moved one more time. The letter, he emphasized, underscored everything wrong with the fevered takeover game played by corporations in recent years and which he had just lived through. It is a game, Raphael believes, that is "bad for the country," a game marked by a short-sighted, bottom-line mentality, fed by "vulture" speculators, imposing astronomical costs on management resources and causing needless "psychic distress" and turmoil for workers.

All that was seen in the more than year-long battle for control of Atlantic Research, Raphael said. The fees ARC paid to its investment bankers (First Boston Corp.), its lawyers (Skadden, Arps, Slate, Meagher & Flom) and others retained to fight a takeover came to an estimated $3 million, according to one company estimate. The costs, in terms of turmoil and loss of productivity among employes, was enormous, Raphael said.

"What is the dollar value of that psychic distress?" he asked. "People stop working, nothing is getting done. ... People are sitting around wondering what is going to happen next."

The end result, he said, is only more uncertainty -- new owners with an unknown agenda. "You put all these things together ... and you have to ask, is it worth it?" he said.

Not that Raphael doesn't benefit financially. He became the firm's largest individual shareholder in the 1970s, buying $160,000 worth of stock with borrowed funds. Last week, he reluctantly tendered his remaining 326,645 shares at Sequa's $31-a-share asking price, netting him a pretax profit of about $10 million.

But Raphael, 62, believes there are larger issues at stake, enough to turn him into an outspoken critic of hostile takeovers. It is not an unheard-of transformation -- many other top executives who have gone through bruising takeover fights have come away with similar views. But it is an unusual position for a business school dean at a university known as a national bastion of laissez faire economics.

"I think we were one of the great companies in this country," Raphael said. "We always felt we knew how to run this company better than anybody ... We were smart."

Raphael's role at ARC will officially end at midnight tonight, when Sequa's tender offer expires, for all practical purposes sealing the $284 million deal. Within the next couple of days, he and the rest of the management team that has run the company for the past 12 years -- William H. Borten, ARC's president and chief executive officer; W. Gerald Hamm, its executive vice president; and others -- will lose their titles and surrender control to Sequa, formerly called the Sun Chemical Corp., a $1.2 billion firm with interests in gas turbines, jet engines, military electronics and specialty chemicals.

Last week, Sequa President Robert E. Davis visited with ARC managers and gave renewed pledges that the new owners have no plans to sell parts of the company or lay off employes. Davis indicated that Sequa plans to keep the company as a separate subsidiary, with existing operating management, under the Atlantic Research name.

"He gave the right kind of assurances," said Borten, who expects to stay on. "What he said was, if it ain't broke, they're not going to try to fix it."

Atlantic Research was anything but broke when it first became a takeover target more than a year ago. Since 1976, when Raphael, Borten, Hamm and seven others acquired the Atlantic Research division of the old Susquehanna Corp. in a leveraged buyout, the firm has blossomed into one of the Washington area's largest and most profitable defense contractors. From less than $30 million in sales 12 years ago, it has grown exponentially virtually every year, posting $263.2 million in revenue in 1986 with profits of $14.7 million.

At the heart of the company's business, accounting for about half its sales, is a rocket propulsion division that is ranked among the tops in the field, manufacturing solid rocket motors for such key Pentagon weapons systems as the Trident nuclear and Tomahawk cruise missiles and the Army's multiple launch rocket system. When Afghan guerillas shoot down Soviet helicopters, they use handheld Stinger missiles propelled by motors produced at Atlantic Research's rocket facility in Gainesville, Va.

The company has long since diversified into other areas -- most notably the marketing of Tempest electronic and computer security systems used to protect sensitive government data. Raphael, who stepped down as CEO two years ago, notes that ARC consistently managed to produce a greater than 20 percent annual return on equity for its shareholders.

But, Raphael said last week, ARC always believed in something more than maximizing short-term profits for its shareholders.

The company gave annual bonuses averaging $600 to its employes and tried to create an informal atmosphere in which workers' views were not only listened to, but actively solicited, he said. It walked away from foreign deals in the Dominican Republic, the Philippines and other countries when strange "off the book" commissions or payoffs were requested. It prided itself on the quality of its work and on never getting tagged in the defense contractor scandals of several years ago.

"You can always give your shareholders more by squeezing your customers, but we said no, we're not going to do that," Raphael said. "And in the long run, if employes are happy and feel they have security ... it will reflect in better work and higher productivity and the stock goes up and everybody will be happy."

Such was the case, Raphael believes, at Atlantic Research when, late last year, Clabir Corp. of Greenwich, Conn., launched a hostile takeover bid proposing a $36-a-share package of securities and cash that was widely derided by financial analysts. Suddenly, a new group of players turned up on the scene -- Wall Street arbitrageurs who began buying up blocks of ARC stock and then swamping Raphael and other board members with calls pressuring them to agree to sell the company.

"You had a major transfer of stock from your loyal, long-term shareholders to ... people who have no interest in what's going to happen to the company beyond next week, who are in it for the quick kill," he said.

Of all the aspects of the ARC fight, the pressure from the arbitrageurs was the most distasteful to its chairman. Starting with the Clabir bid last year and escalating when Sequa showed up on the scene this fall, Raphael says he was peppered with calls from faceless arbs, badgering him about his plans and hounding him with implied threats of lawsuits if he didn't do "what's best for the shareholders."

Raphael said, employe morale began to suffer, productivity fell off and key managers began considering jumping ship. On top of the burgeoning fees being paid to the investment bankers and lawyers who are figuring out how to fend off the raiders, a new cost was imposed -- handsome severance agreements for about 50 top and middle managers to keep them from bailing out.

"You suddenly realize that key people who felt they had security, the people who are running your company, are looking for jobs elsewhere," he said.

ARC might have been able to weather all of this had it not been for the one factor that nobody counted on -- the collapse of the stock market on Oct. 19. ARC had initially welcomed Sequa as a minority investor when the New York company bought out Clabir's 12.3 percent stake in the firm. But when the market dropped, ARC stock took a beating, dropping from the mid-20s to below $19 at one point (compared with more than $30 a share when the Clabir threat was active).

Sequa moved in for the kill, first with a $30-a-share offer. Most analysts believed ARC was worth at least $35 a share, but with the newly depressed mood on Wall Street, a "white knight" could not be found to counter the Sequa bid. Some 40 firms were contacted, including many major defense contractors, but there were no takers. ARC was left with no choice but to negotiate to get another $1 a share out of Sequa.

"If you had asked me the day before {Black Monday}, would I have sold my stock for $35 a share, I would have said, no way," Raphael said. "I would have said it was worth somewhere between $35 and $40. ...

"I was wrong. The stock is not determined by what it's worth but by the perception of people in the market who are both a lot smarter and a lot dumber than you are," he said.

As he reflected on his experiences last week, Raphael said he is moving on to other goals -- primarily, attempting to turn George Mason into one of the nation's best business schools. He also owns another company, Night Owl, that does between $2 million to $3 million in business a year supplying burglar alarms to Peoples Drug and other local stores. He also is on the board of Envipco, a McLean environmental firm.

And he still will be watching, purely as an onlooker, at what happens to ARC. It may be, he said, that all the employes will keep their jobs and continue to thrive. It may be, he said, that Sequa will "turn out to be even smarter and better managers of ARC than we were."

However, he added, "I don't think so."