I’ve previously blogged about how private equity funds are finding that activists -who have historically been a source of deal flow for PE funds – are increasingly competing with them for deals. This Skadden memo on 2019 activism trends highlights how the lines between activism & private equity continue to blur:
A key trend to watch in 2019 is the blurring of the lines between traditional shareholder activism — where investors, typically hedge funds, take an ownership position in a public company and seek to effect material change by utilizing various tactics including proxy contests, stockholder proposals, and public and private agitation — and private equity transactions, where investment firms aim to acquire or take a significant position in private companies (or public companies that they seek to take private) with the goal of exiting in the future at a higher price.
Over the past few years, activist investor Elliott Management has engaged in a more traditional private equity strategy, including its acquisition of Gigamon in 2017; its purchase, with Veritas, of Athenahealth in November 2018; and most recently, its take-private acquisition, part-nering with Siris Capital, of Travelport. Early in 2019, activist investor Starboard Value stepped into the quasi-private equity space with its $200 million strategic investment in Papa John’s.
The memo says that in some respects, private equity is a “natural next step” for activists. One reason is that by demonstrating the capability to acquire the company an activist increases its credibility when it approaches a company. After all, the knowledge that a company is dealing with somebody that is willing to acquire or make a significant investment in it is unlikely to be lost on the board & management.
– John Jenkins