With M&A activity expected to increase in 2014, shareholder activism is an important factor to be considered in the planning, negotiation, and consummation of corporate transactions. In 2013, a year of relatively low deal activity,1 it became clear that activism in the M&A context was growing in scope and ambition. Last year activists were often successful in obtaining board seats and forcing increases in deal consideration, results that may fuel increased efforts going forward. A recent survey of M&A professionals and corporate executives found that the current environment is viewed as favorable for deal-making, with executives citing an improved economy, decreased economic uncertainty, and a backlogged appetite for transactions.2 There is no doubt that companies pursuing deals in 2014—whether as a buyer or as a seller—will have to contend with activism on a variety of fronts, and advance preparation will be important.
While the traditional areas of board representation and deal price no doubt will remain the highest value targets in M&A activism, one newer area to watch for activity in 2014 is appraisal rights litigation and arbitrage, which became a more common tactic pursued by activists in 2013. Shareholder activism is poised to have an even greater impact in the M&A context this year and companies should be aware of and prepared for this possibility if they pursue an M&A transaction.
