How do activists evaluate and pursue M&A-related campaigns (break up a deal or force a sale)?

How to answer

M&A-related activism targets both in-progress deals and standalone companies: (1) Opposing a deal: the activist argues the target is selling too cheaply (demanding a higher price or blocking the deal to preserve standalone value) or that the acquirer is overpaying (shorting the acquirer); (2) Bumpitrage: buying the target and pushing for a price increase through public campaigns, vote threats, or by encouraging competing bidders; (3) Forcing a sale: accumulating shares in an undervalued company and publicly calling for a strategic review or sale process; (4) Opposing a defense: challenging poison pills or other defensive measures that prevent third-party bids. The analysis involves: independent valuation of the target (DCF, comps, precedent transactions), assessment of whether a higher offer is achievable, modeling the probability of alternative outcomes (higher bid, deal breaks, standalone plan), and evaluating the shareholder base's willingness to reject a deal or support a sale. Key legal considerations include Revlon duties, the business judgment rule, and whether the board conducted a fair process. Successful M&A-related activism can generate 10-30% incremental returns above the initial deal terms.

Key idea: Oppose cheap deals, push for bumps, or force strategic reviews; 10-30% incremental value potential.