Richard Grossman: Preparing for Shareholder Activism On Your M&A Deal

September 26, 2019 | Activist Updates, Hedge Funds, News

M&A is attractive to activists for its rich returns. How can a company steer its M&A deal past (or with) activist hedge funds?

Richard Grossman, a partner in Skadden’s M&A practice, has advice on tackling activist hedge funds during an M&A transaction.

Firstly, structuring a deal that skirts shareholder approval requirements is no guarantee it will get past activist scrutiny. Grossman cites the example of Occidental’s acquisition of Anadarko Petroleum which technically did not need shareholder approval. Carl Icahn’s campaign nevertheless took a different route for the removal of the company’s directors and alteration of its charter documents.

Act as your activist

A company should take a proactive approach and prepare by “acting as its own activist.” That’s done well by proposing a well-reasoned transaction rationale and evidence of careful and professional consideration by the board. Above all, the transaction should, and be seen to, create value for stakeholders.

However, understand that ongoing communication and advance dialogues with shareholders can be instrumental in heading off potential objections amid a deal.

Plan and prepare for activist hedge funds

Plan well for opposition from an activist. Identify potential criticisms from activist hedge funds, and prepare rebuttals in advance.

It’s important also to recognize the tools of the activist’s trade, in other words, their legal arsenal. These include a proxy battle, litigation, or a “books and records” demand. Also, check for lurking loopholes in the company’s governing documents which the activist hedge fund can exploit.

What are the trends?

During the first half of 2019:

  • 37 companies faced demands from activists for M&A
  • 18 companies faced objections to proposed M&A
  • 13 companies fielded demands for breaking up the business or spin-offs

“As activism has become a widely accepted strategy to generate “alpha,” we expect that activism will continue to have a significant impact on M&A deals,” says Grossman.

The article “Deliberate process” by Richard Grossman appeared in M&A Activism 2019, a report published by Activist Insight.

Free Industry News

Subscribe to our free newsletter for updates and news about alternatives investments.

  • This field is for validation purposes and should be left unchanged.


Latest Alternative Investment News
Artificial Intelligence: AMD Takes On Rivals In The AI Chip Sweepstakes
December 7, 2023     Artificial Intelligence, News

Chipmaker AMD (NASDAQ: AMD) has unveiled a range of innovative AI solutions spanning from data centers to personal computers. The AMD Instinct MI300 Series features data center AI accelerators, while…
Digital Assets: Robinhood Debuts Crypto Trading On Its App In The EU
December 7, 2023     Digital Assets, FinTech, News

Robinhood (NASDAQ: HOOD) has launched its Crypto app in the European Union (EU), allowing eligible customers to engage in crypto trading with the added incentive of earning Bitcoin rewards. Customers…
FinTech: Samsung Electronics Ties With Mastercard’s Wallet Express
December 7, 2023     FinTech, News

Samsung Electronics (KRX: 005930) and Mastercard (NYSE: MA) have partnered to launch the Wallet Express program, offering banks and card issuers a cost-effective way to expand digital wallet offerings. Through…
Venture Capital: Revaia, Europe’s Biggest Female-Led VC Firm, Racks Up $160M For Second Fund
December 7, 2023     ESG and Sustainability, News, Venture Capital

Revaia, Europe’s largest female-founded venture capital firm, has successfully raised €150 million ($160 million) for its second fund, Revaia Growth II. The funding was secured from sovereign wealth funds, family…