Shareholder activism played a key role in merger
Earlier in this series, we discussed the details of the merger of Citrix Systems’ (CTXS) GoToMeeting with LogMeIn. Citrix is the latest to buckle under pressure from Elliott Management, an activist investment firm headed by Paul Singer.
In June 2015, Elliott Management sent a letter to Citrix stating that the company could maximize shareholder returns by streamlining its costs and spinning off some units. At that time, Elliott Management had a 7.1% stake in Citrix. Following this, Citrix shares rose by ~7%.
Elliott Management’s strategies usually revolve around taking a stake in a company and then devising ways to maximize shareholder returns. The majority of these companies find it difficult to report revenue growth, which impacts their profitability and consequently their stock prices. Elliott Management usually exerts considerable pressure on the companies either to change their capital structure or strategy, to spin off, or sell to a PE (private equity) firm.
Elliott Management’s expertise in the technology sector
In February 2016, Elliott Management announced its stake in Symantec (SYMC), which helped the company’s stock surge by ~9%. In Elliott Management’s words, “Within the technology sector, we have made approximately three dozen active investments and have successfully identified value-creating opportunities,” referring to companies such as Citrix, Brocade (BRCD), Riverbed (RVBD), and Juniper (JNPR), among others.
In the past, Elliott Management pressured EMC (EMC) to consider various options to unlock “shareholder potential.” Elliott Management had a considerable influence over the Dell-EMC deal, which is the biggest acquisition to date in the technology space. The tech sector seems to be Elliott Management’s strength, which explains why investors’ hopes grow whenever the hedge fund announces its stake in a particular tech company.