Actionable Ideas for Companies and Sponsors
Increased Shareholder Opposition to Announced M&A Transactions
Given the intense focus by investors on “stewardship” (i.e., active ownership) and the willingness of institutional investors to second guess the decisions of public company Boards, we expect the trend in contested friendly M&A to continue in the year ahead. In this environment, it is critically important for public company Boards and management teams to take a proactive and hands-on approach when negotiating deal terms and when designing M&A processes in anticipation of high shareholder scrutiny.
Over the last three years, shareholder opposition to announced M&A transactions has kept pace with the record M&A volumes across Europe and the U.S., with institutional investors in nearly half these situations successfully improving deal terms or terminating transactions outright.
Recently several high-profile M&A transactions agreed to by the Boards of public companies have faced significant shareholder opposition following the deal announcement and institutional investors have become increasingly comfortable taking the lead in challenging deals, as these investors face increased pressure to take on a more active role in setting the corporate agenda to justify their management fees. For example, in November, Paulson & Co., a 9.5% shareholder in Callon Petroleum, after two months of fierce opposition, dropped its opposition to the announced acquisition of Carrizo Oil & Gas after Callon eliminated golden parachute provisions for Carrizo management and reduced its offer price for the company.