Activism and Takeovers

66 Pages Posted: 28 Mar 2015 Last revised: 8 Sep 2020

See all articles by Mike Burkart

Mike Burkart

Swedish House of Finance; London School of Economics and Political Science, Department of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Samuel Lee

Santa Clara University - Leavey School of Business; European Corporate Governance Institute (ECGI); Swedish House of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: August 17, 2020

Abstract

We compare activism and takeovers from a blockholder’s perspective who can invest effort into improving firm value. Profits from the two intervention modes move in opposite directions when the marginal return to effort changes such that activism, although less efficient, can be more profitable. Activists are most efficient when brokering takeovers rather than restructuring firms directly. Such takeover activism should record superior returns as its opportunity cost includes the foregone returns from free-riding on tender offers instead. Our results suggest that activists specialize in governance reforms and that limited, temporary engagement is a strength rather than a shortcoming of activism.

Keywords: Hedge fund activism, takeover activism, merger activism, hostile takeovers, tender offers, market for corporate influence, market for corporate control, blockholders

JEL Classification: G34, G23

Suggested Citation

Burkart, Mike C. and Lee, Samuel, Activism and Takeovers (August 17, 2020). Swedish House of Finance Research Paper No. 15-04, European Corporate Governance Institute (ECGI) - Finance Working Paper No. 543/2018, Available at SSRN: https://ssrn.com/abstract=2585836 or http://dx.doi.org/10.2139/ssrn.2585836

Mike C. Burkart

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

London School of Economics and Political Science, Department of Finance ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

HOME PAGE: http://www.cepr.org/default_static.htm

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Samuel Lee (Contact Author)

Santa Clara University - Leavey School of Business

500 El Camino Real
Santa Clara, CA California 95053
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

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