September 27, 2018

M&A Activism: Hedge Fund Activism Leads to Better Buy-Side Results?

A recent study says that hedge funds do all sorts of good things for the shareholders of buy-side companies:

Using Schedule 13D filings by hedge funds and M&A announcements made by US companies from 1993 to 2015, we show that hedge fund activism leads to lower M&A activities, lower takeover premiums, more favorable market reactions to M&A announcements, and better post-M&A stock and operating performance. We show that our results are unlikely to be driven by selection bias. Overall, our results suggest that hedge fund activism increases shareholder wealth by forcing corporate M&A to be more efficient and disciplined (e.g., fewer but better acquisitions).

Earlier this year, our panelists touched on the phenomenon of buy-side M&A activism in our “How to Handle Post-Deal Activism” webcast, and you should check out the transcript for more insight into this small but growing corner of the activist universe.

John Jenkins