Hedge funds and Private Equity - PES

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The massive interference of shareholders in matters of firm strategy had so far been unusual and
practically unheard of in Germany. In response to it the supervisory board brought legal action
against the foreign fund companies, alleging that they had acted in concert. It was claimed, that
these investors, whose combined stake in Deutsche Börse exceeded 30%, had coordinated
their actions with a view to exerting jointly a controlling influence, that was not warranted by the
size of their holding alone. Acting in concert is not permitted in Germany. If it nevertheless happens,
the holders of the combined stake are required to make an offer to the remaining shareholders
for the purchase of their shares. The supervisory board was unable to prove that the
fund companies had acted in concert, since the fund companies had no need to strike any such
deals, because their views largely coincided anyway.
The intervention of the hedge funds in the dealings of the German stock exchange had a very serious
consequence: Now the stock market scenery in Europe was anew sorted without participation
of Deutsche Börse AG. The prevention of the purchase of the LSE by the German stock
exchange was one of the important reasons that subsequently now American stock exchanges
received unchecked influence on the big European stock exchanges. Whether this was one of
the destinations of the hedge funds beside the income return destinations, is not known.
3. LBO exit (secondary LBO, IPO, listing)
Many people were surprised not to see TCI and the other investment companies cash in their
shares of Deutsche Börse, after they had successfully raised their value and gotten a big dividend
on top of it. But many hedge funds have changed their strategy over the last few years. They
used to adopt a hit-and-run-strategy, which means that they wanted to get in and out of an investment
as fast as possible, while taking as much money as they could grab. Nowadays they
are also looking for fairly long-term investments that can stretch even more than three to five
years. To exert more control over their investments, hedge funds intervene in the business policy
of firms, which shifts the balance of power.
References
Handelsblatt 10.05.05, p. 18; Börsenzeitung 11.05.05, p. 1, p. 5; Süddeutsche Zeitung 11.05.05, p. 30;
Die Welt 12.05.05, p. 3; Handelsblatt 18.05.05, p. 25; Wirtschaftswoche 19.05.05, p. 48 ff.; Börsenzeitung
20.05.05, p. 2, p. 4, p. 9; Süddeutsche Zeitung 20.05.05, p. 25; Handelsblatt 20.05.05, p. 1; Frankfurter
Allgemeine Zeitung 23.05.05; Frankfurter Allgemeine Zeitung 24.05.05, p. 29; Börsenzeitung
24.05.05, p. 3; Frankfurter Allgemeine Zeitung 27.05.05, p. 25; Frankfurter Allgemeine Zeitung 28.05.05,
p. 21; Handelsblatt 12.09.05, p. 24