October 11, 2005

Impact of Hedge Funds on M&A

Loved the webcast on “The Convergence of Hedge Funds and Its Impact on M&A” that just concluded (audio archive up and transcript in next week or so). Check out this Forbes article about how Computer Horizons’ board was just ousted by an activist hedge fund, Crescendo Partners.

Crescendo Partners is one of those fairly rare hedge funds that is a “special situation” fund (ie. often takes a position to force a transaction), rather than an arbitrage fund. On the webcast, Dan Burch from MacKenzie Partners noted that only 40 or so funds are full-time activists out of a pool of 8000 funds! But he noted that many funds are part-time activists and a new fund springs up, on average, one per day – and that it is fairly easy for these new funds to raise $100 million. Dan also reminds us that these investors are quite sophisticated.

My take is that the Computer Horizons’ board was overthrown in the wake of a poorly designed merger, which was rejected by shareholders last month. Wondering how hedge funds fit into the majority vote movement equation? It’s a scary thought (and good topic for a future webcast).