Activist Arbitrage in M&A Acquirers
16 Pages Posted: 27 Mar 2018 Last revised: 29 Apr 2022
Date Written: March 22, 2018
A relatively new activist investor strategy is to purchase shares in the acquirer after an M&A announcement and exercise shareholder rights to change deal terms, or even to block the deal, through public campaigns. We provide new evidence on how the strategy affects target firms and activists' returns. Activists tend to target deals involving defense mechanisms and multiple bidders, and acquirers with a history of low returns on invested capital. By blocking some deals and pushing other acquirers to lower their bids, such an "activist arbitrage" strategy yields significant returns and serves as a governance antidote to value-destroying acquisitions.
Keywords: Activist Arbitrage, M&A Acquirers, Governance
JEL Classification: G23, G34
Suggested Citation: Suggested Citation