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Activism Pressure and the Market for Corporate Assets

The rise of shareholder activism, and its recent international expansion, have led researchers to look at many aspects of hedge fund activism. Academic papers have almost exclusively focused on the effects on firms targeted in activist campaigns. But the intense and sustained presence of hedge fund activists in many industries and markets makes it likely that activism produces effects beyond those on activism target firms. The real effects of activism on other firms, stakeholders, institutions, and markets remain largely unexplored.

Our paper attempts to make headway in this direction by exploring the impact of hedge fund activism on markets for … Read more

Wachtell Lipton Discusses Mergers and Acquisitions — 2019

As a whole, 2018 proved to be another strong year for M&A.  Total deal volume reached almost $4.2 trillion globally, higher than the $3.7 trillion volume of 2017, but still less than the record of over $5 trillion set in 2015.  Deals involving U.S. targets totaled over $1.7 trillion, compared to approximately $1.5 trillion in 2017.  The number of large deals significantly increased in 2018, with 60 deals over $10 billion announced globally (compared to 46 deals in 2017).  The technology sector saw the largest deal volume, followed by healthcare, oil and gas, and real estate.  Private equity firms also … Read more

Paul Weiss Offers M&A at a Glance for December 2018

M&A activity in December 2018 declined across most measures. While M&A activity reached 12-month lows both globally and in the U.S., the declines in the U.S. were significantly more pronounced. Deal volume by dollar value[1] decreased, by 55.2% to $65.36 billion in the U.S., and by 17.4% to $216.72 billion globally. In the U.S. the average value of announced public mergers declined to a 12-month low of $1.35 billion. Figure 4. The number of deals also decreased, by 17.3% to 430 in the U.S., and by 12.6% to 2,250 globally, hitting the lowest levels for number of deals … Read more

Hedge Fund Activism Is About More Than Making a Quick Buck

Debate continues to rage among politicians, professors, senior lawyers, and members of the media over the regulation of hedge fund activism. The primary criticism is that, in the absence of merger and acquisition activity, such activism does not create value for the target company’s shareholders in the long-term. Furthermore, even in the event of a hedge fund activist-initiated merger, studies have indicated that value-creation is limited to short-term stock price boosts and takeover premia.

With the objective of examining whether hedge fund activists are indeed “wolves,” as described by critics whose goal is to extract short-term profits, we recently wrote … Read more

Wachtell Lipton Offers Acquisition Financing Year in Review: From Break-Neck to Brakes-On

The credit bull market finally exhibited signs of fragility in the fourth quarter of 2018, putting the brakes on what had seemed poised to be another banner year for corporate borrowers.  The skies may yet clear, but for savvy borrowers the New Year is a good time to prepare for turbulence.  Looking ahead to 2019, we contemplate strategies for M&A in choppy financing markets, the practical impact of credit rating downgrades, and the risks posed by the rise of “default activism” in the debt markets.

The Financing Markets in 2018: A Sharp Transition

A Hot Start… 

Through its first three … Read more

Wachtell Lipton on the State of Play of Activism at Year-End 2018

As we noted in early 2018, the threat of activism continues to be high, and has become a global phenomenon.  The conclusion of a volatile and dynamic 2018 prompts a brief update of the state of play.

  • Activist assets under management remain at elevated levels, encouraging continued attacks on large successful companies in the U.S. and abroad.  In many cases, activists have been taking advantage of recent stock market declines to achieve attractive entry points for new positions.  These trends have been highlighted in several recent media reports, including in The Wall Street Journal and Bloomberg.
  • While the robust

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How Does Private Firm Innovation Affect Anti-Takeover Provisions in Corporate Charters?

The role of anti-takeover provisions (ATPs) in the corporate charters of firms has recently become a matter of considerable debate in the academic literature. On the one hand, earlier studies have argued that ATPs entrench firm management and therefore depress firm performance by mitigating the disciplining effect of the market for corporate control on firm management (Field and Karpoff (2002)). On the other hand, more recent papers have argued that ATPs in fact improve firm performance post-IPO. Chemmanur, Paeglis, and Simonyan (2011) argue that ATPs allow higher quality top management teams to create long-run value for the firm post-IPO and … Read more

Paul Weiss Offers M&A at a Glance for November 2018

With the exception of sponsor-related transactions, M&A activity in November 2018 generally declined. Deal volume by dollar value[1] decreased, by 9.1% to $141.10 billion in the U.S., and by 21.4% to $254.76 billion globally. The number of deals also decreased, by 11.1% to 431 in the U.S. and by 12.8% to 2,272 globally, hitting the lowest levels for number of deals both in the U.S. and globally in the history of this publication.

Strategic vs. Sponsor Activity

In line with October, the sponsor M&A market performed better than strategic deals. The number of strategic deals decreased in November 2018 … Read more

Debevoise & Plimpton Discusses CFIUS Pilot Program Aimed at Technology

On November 10, the U.S. government’s pilot program regulations aimed at monitoring and controlling foreign investment in certain “critical technologies” became effective. How might the program, which follows on the recent statutory expansion of CFIUS review, affect tech companies’ ability to raise investment capital from foreigners?

Companies in the technology sector—including telecommunications, software, manufacturing and biotechnology—are likely familiar with potential CFIUS review of transactions where foreign persons’ acquisition of control of U.S. businesses raises national security concerns. Notably, the concept of “control” goes well beyond having a majority voting interest and includes governance rights and significant economic stakes that would … Read more

Paul Weiss Offers M&A at a Glance for October 2018

M&A activity in October 2018 remained mixed, but included more positive indicators compared to September and the general declining trend line so far this year. Deal volume by dollar value[1] significantly increased overall, by 98.2% to $154.56 billion in the U.S., and by 35.5% to $328.77 billion globally. The number of deals, however, decreased slightly overall, by 2.6% to 371 in the U.S. (among the lowest levels since the beginning of this publication in 2012) and by 4.5% to 2,248 globally.

Strategic vs. Sponsor Activity

Reversing a more typical trend over the last year, strategic deals showed less strength … Read more

Skadden Discusses Merger Reviews and Antitrust Inquiries in Case of “No-Deal” Brexit

As the U.K.’s March 29, 2019, exit date from the European Union approaches, companies involved in merger reviews or antitrust investigations should pre-emptively address the risk of a “no-deal” Brexit.

Both the U.K. and EU have antitrust laws that can apply simultaneously to the same merger or allegedly anti-competitive conduct. Currently, procedural rules determine how jurisdiction is divided between the European Commission (Commission), at the EU level, and the Competition and Markets Authority (CMA), at the U.K. level. But there are no transitional provisions dictating how jurisdiction for pending matters is to be handled in the event of a “no-deal” … Read more

Can Companies and M&A Law in Europe Adapt to the Market for Corporate Control?

Takeover regimes in Europe have been under persistent scrutiny by the public, politicians, and market participants. Sometimes, that is just the nature of the game: Takeovers create winners and losers, and the latter (with the help of their champions and constituencies) often complain. But other times the discontent derives from the inadequacy of regimes in handling certain deals. The task of the law is not easy: Deals are complex and unique, while the law is general. In particular, target companies have a particular ownership structure that must fit the paradigm contemplated by the law, which in the EU consists almost … Read more

Debevoise Discusses UK’s Proposed National Security Review for M&A

Many countries have been looking again at their ability to block acquisitions when they threaten national security. For example, we reported on a change to German law in July last year, and a European Commission proposal (which would cover all EU member states) in October. Most recently, a new law in the United States has increased the power of the Committee on Foreign Investment (CFIUS) to block deals. Such rule changes – often triggered by a controversial foreign acquisition – are understandable, but investors need to know the process and timeline. Vague tests, long clearance procedures or excessive look-back periods … Read more

Debevoise Discusses the UK’s Proposed National Security Review for M&A Deals

Many countries have been looking again at their ability to block acquisitions when they threaten national security. For example, we reported on a change to German law in July last year, and a European Commission proposal (which would cover all EU member states) in October. Most recently, a new law in the United States has increased the power of the Committee on Foreign Investment (CFIUS) to block deals. Such rule changes – often triggered by a controversial foreign acquisition – are understandable, but investors need to know the process and timeline. Vague tests, long clearance procedures or excessive look-back periods … Read more

Paul Weiss Offers M&A at a Glance for September 2018

M&A activity in September 2018 was mixed compared to August levels, but generally reflected an overall continuing downward trend starting in April of this year.  Deal volume by dollar value0F[1] decreased in the U.S. by 44.5% to $77.06 billion and globally by 16.1% to $238.25 billion.  While the number of deals increased in the U.S. by 2.0% to 357 (the second lowest level since the beginning of this publication in 2012), the number of deals decreased globally by 1.5% to 2,195.

Strategic vs. Sponsor Activity

The number of strategic deals increased in September 2018 by 4.8% to 262 in … Read more

Wachtell Lipton Discusses the State of Play in Activism

As we approach the 2019 proxy season, developments since September 2017 prompt a brief updated review of the state of play.

  • The threat of activism remains high, and has become increasingly global.
  • Activist assets under management remain at elevated levels, encouraging continued attacks on many large successful companies in the U.S. and abroad.
  • In the current robust M&A environment, deal-related activism is prevalent, with activists instigating deal activity, challenging announced transactions (g., the “bumpitrage” strategy of pressing for a price increase) and/or pressuring the target into a merger or a private equity deal with the activist itself.
  • “Short”

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Debevoise Discusses Delaware Chancery Ruling on a Material Adverse Event

On October 1, the Delaware Court of Chancery, in a record-breaking 246-page opinion, held that Fresenius Kabi AG (a German publicly listed healthcare company) did not have to consummate its proposed acquisition of Akorn, Inc. (a Nasdaq-listed generic pharmaceutical company) on the basis that Akorn had suffered a Material Adverse Effect, or MAE. The court also found that Akorn had breached certain representations in the parties’ merger agreement, and that the breach would reasonably be expected to result in an MAE. The decision represents the first time in memory that a Delaware court has allowed a buyer to walk away … Read more

Justice Department’s Antitrust Chief Talks Modernizing M&A Review

Good morning, and thank you for inviting me to speak here today. It is a pleasure to be at Georgetown University for this year’s Global Antitrust Enforcement Symposium.

Events like these, which bring competition enforcement officials together to speak with members of the private bar, the business community, and the academic community, serve an important role in the continued development of antitrust law and its enforcement.  They facilitate the rule of law by increasing transparency and predictability in enforcement.  This, in turn, promotes competition and conserves both public and private resources by allowing the private bar to better counsel their

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Covington & Burling on the UK’s “No-Deal” Competition and Merger Guidance

The UK Government published its highly-anticipated technical guidance on merger review and anti-competitive activity on 13 September 2018 which will apply in the case of a ‘no-deal’ Brexit (the ‘Guidance’). Although brief, it provides market players with some form of practical advice and insights on what to expect, how cases are likely to be divided between the EU and UK regimes, how UK competition law will develop, and suggests in what ways post-Brexit competition damages actions in the UK Courts may change. This Guidance follows on from the previously released ‘no-deal’ state aid guidance – as was covered in our … Read more

Corwin at a Crossroads: Could DVMT Stock Be the Tracker Jacker in Dell’s Hunger Games?

Of all the conjured hazards faced by the teenage gladiators in the dystopian novel The Hunger Games, the Tracker Jacker (a genetically engineered wasp) was the most deadly and unpredictable when provoked. Dell Technologies Inc. may soon have to contend with its own species of Tracker Jacker, as speculation mounts around the company’s pending offer to its public Class V tracking stock shareholders (NYSE: DVMT)—a cash-and-stock transaction with a claimed valuation of $109 per share.  Several activist hedge funds with substantial DVMT positions have vigorously opposed the proposed deal, and their burgeoning resistance has evidently induced Dell to hint Read more