DealLawyers.com Blog

January 11, 2006

Hedge Funds Stirring Up Europe

As the excerpt from Monday’s Financial Times article below indicates, hedge funds are becoming active dealmakers all over the world:

In 2006, one business trend will carry great repercussions for every corporate finance chief in America, Europe and Asia: the rise of the hedge fund activist. The sturm und drang caused by the successful hedge fund-led revolt against Deutsche Borse’s planned acquisition of the London Stock Exchange in 2005 was a watershed event. The revolt led to the ousting of Deutsche Borse’s top officials and turned Chris Hohn, the manager of London-based The Children’s Investment (TCI) fund who led the opposition, into a cult figure for hedge fund managers.

“Everybody wants to be Chris Hohn now,” says one London-based hedge fund manager. Variations on the theme played out at several other US companies, including Time Warner, Blockbuster and McDonald’s. This was the year that the Chris Hohns of the world even supplanted Eliot Spitzer, New York’s crusading attorney-general, as the spook that keeps executives awake at night.

In another defining moment, the head of Germany’s Social Democratic Party compared hedge funds and other financiers to “locusts”. A better choice might have been sharks. Board-level executives would be well-served to learn more about an analogy between sharks and hedge fund managers because, like it or not, more companies will find themselves swimming with sharks in 2006.