Bill Ackman’s Pershing Square Capital Management has opened a brave new world for activist funds with its move to team up with Valeant Pharmaceuticals to make a hostile takeover offer for botox maker Allergan, say investment bankers and lawyers.
Chris Young, who heads Credit Suisse’s global contested situations team in New York that deals with activist funds, says this pairing to try and acquire a company is a watershed development.
“I'd say it's potentially a seminal moment for activism and reflects the continued reduction of the stigma attached in some quarters to activism,” Mr Young told Data Room in an interview. “Mainstream investors, financial sponsors and now strategic acquirers are more willing then ever to support or pair up, both publicly and privately, with hedge-fund activists to achieve their own individual goals.”
In a visit to Australia last month, Mr Young said Australian boardrooms should prepare for the arrival of the likes of Mr Ackman, Carl Icahn, Daniel Loeb, Paul Singer and others who have at least $US100 billion in funds under management. Mr Ackman and Mr Loeb now have exchange-traded funds listed in London that could enable them to be “more patient and tenacious” with target companies, according to Mr Young.
In Australia, hedge funds have been active players in M&A situations but there has been nothing matching the Allergan proposal where a corporate player teams up with an activist shareholder.
“This structure of a hedge fund teaming with a company to do an M&A deal may not become the norm for M&A deals in the Australian market, but it does represents another option in the toolkit for corporate bidders,” says Jonathan Farrer, a partner at law firm Corrs Chambers Westgarth in Melbourne. “Activists not only bring capital to the table but in many cases they also have a successful track record of using aggressive tactics, including the threat of a board spill if the target fails to adequately engage.”
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