M&A hasn’t yet slowed down, but if the markets continue on a downward trajectory, it will produce attractive entry points for new activist accumulations, according to Daniel Kerstein.
Kerstein, the global head of M&A, ESG advisory and activist defense at Barclays plc, discussed the state of play for insurgent fund managers and deals amid a shifting macroeconomic landscape on the the latest Activist Investing Today podcast.
“To date, we are seeing that M&A is not slowing down,” Kerstein said. “It is not just execution on deals that were in discussion last year or in the early part of this year, but the level of strategic dialogue remains very high among our clients. We are still for the time being in a pretty strong M&A environment.”
However, Kerstein said if that were to change, it would also impact activist campaigns pushing for deals. “There will definitely be some issues and some struggles for some of those [activist] investments in terms of trying to work your way out and realizing value,” he said. “The funds who have done a better job hedging themselves, whether those are macro hedges or hedges on specific positions, may be better set to move out of those.”
Coupled with fewer transactions, a market drop will create attractive entry points for activists.
“Many activists have struggled to find entry points in sectors like industrials and technology, where valuations have been significantly higher than where they have been historically, and I think that will allow for activists to come into those stocks at perceived valuations that are more attractive,” Kerstein said.
Overall, Kerstein noted that M&A is “incredibly important” to activist campaigns, whether fund managers are publicly pushing for deals or not.
“When you think about what activists are looking for, driving returns for their investors, M&A provides certainty of outcome,” he said. “They are able to push for that outcome, which gives them a premium return, reduced risk, and they can lock in that return.”
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