A new study reveals that an increasing number of corporate America's fight with activist investors is now occurring in the deal table instead of the boardroom, the Financial Times reported.
The number of campaigns that compel firms to fork out more expensive prices when taking over a rival has increased. According to a research done by Simpson, Thacher & Bartlett, hedge funds have pushed higher prices in 14 attempts to takeover a company in the first 10 months of last year. They succeeded in 10 of these tries. The rise is even more marked when compared with the figures in 2012 when there were only four campaigns to increase the price of a potential firm and only one succeeded, the report said.
FT reported that seeking for more expensive deal prices or "bumpitrage" puts together the activist fondness for audacity with the traditional investors' practice of arbitrage in their hope to purchase the firm's shares at a premium.
Two of the campaigns that were successful were the consolidation of MetroPCS and T-Mobile US in 2013 and the $8.6 billion takeover of Celesio by its competitor McKesson, the report said.
Carl Icahn, an activist investor, also successfully campaigned in the buyout of Dell by its founder Michael Dell and his private equity backers. From a proposal of $13.65 per share, the buyout group sweetened their offer to $13.88. Victory was claimed by both sides of the deal which was valued at $24.9 billion, the report said.
FT quoted Icahn as saying about that transaction, "Someone like me is not going to show up in a deal unless it's obvious that a company is being sold too cheap. Dell was different from a classic move just to raise the price of the bid; I was prepared to invest $4bn of our own capital to make a counter-offer because we thought Michael Dell was buying it too cheaply."
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