BusinessWeek – Back in the day, mergers and acquisitions advisers routinely viewed transactions as “in the bank” immediately upon the announcement of a deal. Indeed, deal conference calls were usually filled with congratulatory back-slapping from stock analysts as junior investment banking staffers planned elaborate closing dinners at tony steakhouses. True, regulatory concerns could occasionally scuttle a deal, but the shareholder vote (yawn) was usually a foregone conclusion.
But today, thanks to leadership provided by hedge fund activists, a shareholder vote can be very much in doubt. Consider the multibillion-dollar Novartis (NVS ) buyout of Chiron (NVS ) earlier this year. Chiron stockholder opposition to the buyer’s “best and final” price resulted in hundreds of millions of dollars in incremental value received by target shareholders. Despite the common perception of hedgies as fast-money operators bent on corporate destruction, examples such as Chiron indicate ordinary investors can benefit from activists’ “selfish” efforts.
How have we gotten here? A confluence of trends has conspired to alter the dynamics of dealmaking. First, high-profile M&A disasters like the AOL-Time Warner (TWX ) merger and numerous academic studies together have established a new conventional wisdom among investors that a significant percentage of deals destroy shareholder value. Even if most M&A indeed creates value, investors today will go out of their way to ensure that destructive transactions are not ratified.
