July 21, 2021

Activism: Bumpitrage in the U.K.

In recent years, U.S. buyers & sellers have become familiar with the strategy of “bumpitrage,” in which activists challenge announced transactions and press for a price increase.  This Cleary Gottlieb blog says that this strategy has become increasingly prevalent in the U.K.  Here’s an excerpt:

One of the most noticeable trends that has emerged in the current boom in UK public M&A activity is the heightened level of target shareholder opposition to bids. This is manifesting itself in a number of ways, including through increased and novel “bumpitrage” campaigns as well as through institutional investors becoming more vocal in expressing their discontent at proposed bids. There appears to be a general feeling among a number of the largest UK institutional investors that private equity are acquiring UK public companies “too cheaply”.

Historically, the key negotiating ground in UK public bids has been with the target board before the public announcement of a firm bid. Once the bidder has reached agreement on price with the target board and obtained its recommendation, this has typically been sufficient to deliver a successful deal in the vast majority of cases, absent an intervention from an activist shareholder or competing bidder.

The blog says that these tactics are paying off & have resulted in bidders increasing their offers in 3 deals in the last few weeks. It also advises that bidders should expect that shareholders will be prepared to actively resist bids that they believe undervalue the target, even if the target board supports the deal.

John Jenkins