Activist-Strategic Buyer Tag-Teams : A New Hostile Takeover Template?

To paraphrase the Roman philosophers: "ex Ackman semper aliquid novi." The innovative partnership formed last year between Bill Ackman's Pershing Square hedge fund and Valeant Pharmaceuticals to launch a hostile takeover bid for Allergan, the venerable manufacturer of Botox, stands to net the hedge fund around $2.6 billion (assuming it survives a pending insider trading challenge). Valeant will share in 15% of the profits. Not a bad way to lose a takeover battle! The heads- I-win-tails-I-still-win structure will doubtless have other activist funds salivating, but we do not expect many strategic partners to be lining up to launch a new wave of activist-corporate bidder tag teams. Mostly, this fascinating corporate battle (full disclosure: our firm represented Allergan) highlights the urgent need for reform of certain provisions of the U.S. federal securities laws, which are outdated and out of step with international norms, and leave loopholes that sharp short-term oriented financiers can exploit at the expense of long-term investors