Activist Arbitrage in M&A Acquirers

16 Pages Posted: 27 Mar 2018 Last revised: 27 Sep 2018

See all articles by Wei Jiang

Wei Jiang

Columbia Business School - Finance and Economics

Tao Li

University of Florida - Department of Finance, Insurance and Real Estate

Danqing Mei

Columbia University - Columbia Business School

Date Written: March 22, 2018

Abstract

A relatively new activist investor strategy is to purchase shares in the acquirer after an M&A announcement and exercise shareholder rights to change deal terms, or even to block the deal, through public campaigns. We provide new evidence on how the strategy affects target firms and activists' returns. Activists tend to target deals involving defense mechanisms and multiple bidders, and acquirers with a history of low returns on invested capital. By blocking some deals and pushing other acquirers to lower their bids, such an "activist arbitrage" strategy yields significant returns and serves as a governance antidote to value-destroying acquisitions.

Keywords: Activist Arbitrage, M&A Acquirers, Governance

JEL Classification: G23, G34

Suggested Citation

Jiang, Wei and Li, Tao and Mei, Danqing, Activist Arbitrage in M&A Acquirers (March 22, 2018). Columbia Business School Research Paper No. 18-45. Available at SSRN: https://ssrn.com/abstract=3147304 or http://dx.doi.org/10.2139/ssrn.3147304

Wei Jiang

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States
(212) 854-5553 (Phone)

Tao Li (Contact Author)

University of Florida - Department of Finance, Insurance and Real Estate ( email )

Warrington College of Business
Gainesville, FL 32611
United States

HOME PAGE: http://warrington.ufl.edu/contact/profile.asp?WEBID=7628

Danqing Mei

Columbia University - Columbia Business School ( email )

NY
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
295
rank
96,748
Abstract Views
964
PlumX Metrics