We compare activism and takeovers from a blockholder's perspective who can invest effort into improving firm value. Profits from the two intervention modes move in opposite directions when the marginal return to effort changes such that activism, although less efficient, can be more profitable....

How should bidders finance tender offers when the objective of the takeover is to improve incentives? In such a setting, debt finance has benefits even when bidders have deep pockets: It amplifies incentive gains, imposes Pareto sharing on bidders and free-riding target shareholders, and makes...