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Activists Find New Routes to M&A Opportunities

Published: June 22nd, 2020
Insurgent managers are targeting larger companies and are taking on different roles, a panel of experts told The Deal Economy's 2019 conference.

Activist investors are taking different approaches than they have in the past but continue to create M&A opportunities for big corporations, a panel of experts told the Deal Economy’s 2019 conference on Wednesday, Nov. 20.

“We’re seeing activist activity that is on par with what we’ve seen in previous years but it looks a bit different than it has in the past,” said Kimberly C. Petillo-Decossard, a partner at Cahill Gordon & Reindel LLP. “They are targeting larger companies more than they have historically. They look different. I think they are taking on different roles.”

Petillo-Decossard noted that activist Starboard Value LP injected an unusual $250 million cash allocation to Papa John’s International Inc. (PAPA) in an effort to discourage the chain’s embattled founder and former CEO John Schnatter from launching a campaign.

“Starboard made a preferred investment in Papa John’s,” she said. “That’s not usually what you think of when you think about activism. They are starting to look a little more like investors in private equity and private equity is looking a little more like activists. It [activism] will continue to be a driving force in 2020.”

Jelena Guzenko, director of mergers and acquisitions at Siemens AG (SIEGY), said that the German multinational conglomerate has identified a number of acquisition opportunities because target companies are motivated to be sold to strategic companies rather than pursue an initial public offering that could make them vulnerable to insurgent managers.

“We are seeing lots of opportunities on the buy side for us because lots of targets are being motivated to be sold to strategics like ourselves rather than pursuing an IPO strategy and potentially dealing with shareholder activism,” Guzenko said.

She noted that Siemens itself is less at risk of being targeted by an activist because of German regulations, which limit such opportunities. However, she said the company has pursued an M&A strategy itself.

“We have been breaking out our conglomerate structure and have our companies act more as a fleet of ships rather than a large ship,” she said.

Siemens in May moved to spin off its gas and power business and focus on its digital industries and smart infrastructure business.

Patrick Turner, managing director, lower middle market private equity firm VSS, said that he has been very busy focused on improving acquired corporations from an environmental, social and governance perspective.

“I am busy because smaller companies don’t really have any governance. They don’t have succession planning and there are a lot of other things we can help these companies with,” Turner said.

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