Shareholder Activism in Germany Following Takeover Announcements

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Over the past few years there has been a noticeable increase in the frequency of activist investors building up considerable stakes in German listed companies in the context of public takeovers. One reason for this development is what appears to be a new business model of hedge funds – the realization of profits through litigation after the completion of a takeover. To this end, the funds take advantage of minority shareholder rights granted under German stock corporation law in connection with certain corporate measures which are likely to be implemented for business integration purposes following a successful takeover.

One prominent example of this strategy was the filing of various lawsuits by hedge funds against UniCredit and its management in the aftermath of UniCredit’s acquisition of HypoVereinsbank in 2005 and the subsequent “squeezing-out” of HypoVereinsbank’s remaining minority shareholders in 2007. More recent cases include the takeover offer by Terex for Demag Cranes (2011), by Vodafone for Kabel Deutschland (2013) and, of late, by McKesson for Celesio (2013), where Paul E. Singer’s hedge fund Elliott Management each time acquired substantial shares in the German target.

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