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Activist Investing Today: Zaba Sees M&A Activism Amid Uncertainty

Published: September 30th, 2022
The co-chair of Sidley’s shareholder activism practice explains why an insurgent investor might be more willing to push for M&A than seek out an operational thesis in today’s volatile markets.

The transactional and M&A thesis posed by some activists can actually be more attractive in today’s uncertain markets, according to Sidley Austin LLP partner and shareholder activism practice co-chair Derek Zaba.

“Even if you have issues in the financing market, you still have strategics,” Zaba told the Activist Investing Today podcast. “To the extent you are pushing for strategic buyers, there may be more viability, but there are still plenty of private equity firms with plenty of money to spend, and if they need to put more equity in at a price, they are all going to do it.“

In a conversation that also reviewed expectations for new universal proxy cards for director contests, Zaba suggested that activists may continue to push for transactions because an M&A thesis has a much shorter duration than a three-year operational improvement thesis, and fund managers may be more eager to push for a shorter thesis considering current economic instability.

“In a world with a lot of uncertainty, [an M&A thesis] is a lot more attractive proposition for a lot of these funds that are dedicated activist funds and have to put money in activism and are reluctant to put it in companies where you have to commit yourself to a multiyear campaign,” he said. “You will continue to see more M&A theses.”

Zaba, who worked previously at CamberView Partners LLC and, before that, activist fund Voce Capital Management LLC, also provided his views on the intersection of social issues and activist campaigns — and he said there could be a spike in hostile bids in the months to come.

Insurgent funds, Zaba told AIT, could also increase the size of their slates and be less willing to settle for less now that universal proxy cards are available to them.

Check out the podcast with Derek Zaba here:

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