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Steel Partners' activism efforts at United Industrial, Ronson, and BKF Capital: The good, the bad, and the ugly

Timothy A. Kruse (Department of Finance, Xavier University, Cincinnati, Ohio, USA)
Kazunori Suzuki (Graduate School of Finance, Accounting and Law, Waseda University, Tokyo, Japan)

Managerial Finance

ISSN: 0307-4358

Article publication date: 4 May 2012

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Abstract

Purpose

This paper seeks to analyse Steel Partners' investments and activism targeting United Industrial, Ronson, and BKF Capital to provide context for the debate surrounding shareholder activism by hedge funds and how incumbent management should cope with it. Steel Partners is one of the busiest and most controversial activist investors in both the USA and Japan.

Design/methodology/approach

An in‐depth clinical analysis of Steel Partners activism at three targets is performed. Context is then provided with a broader study of 63 companies targeted by Steel Partners.

Findings

The paper reveals that Steel achieved remarkably different degrees of success with each target. This analysis suggests the use of longer post‐activism windows to examine performance, more nuanced definitions of successful activism, and the inclusion of officer and director ownership as a predictor of activist success and target performance.

Practical implications

Managers wishing to maintain their independence face a difficult balancing act. One option is simply to refuse to negotiate, preferably while maintaining a substantial ownership stake. However, the activist might launch a proxy fight or hostile bid, file a lawsuit, or even encourage a wolf‐pack type campaign. For activists, target selection, especially managerial ownership, and patience are important. Steel quickly achieved its goals at BKF and failed at Ronson despite maintaining its stake for more than 13 years. It suffered large losses in both cases.

Originality/value

This paper provides researchers and practitioners with additional insights into the debate concerning the value of hedge fund activism. It also suggests several new questions to researchers examining corporate governance and activism.

Keywords

Citation

Kruse, T.A. and Suzuki, K. (2012), "Steel Partners' activism efforts at United Industrial, Ronson, and BKF Capital: The good, the bad, and the ugly", Managerial Finance, Vol. 38 No. 6, pp. 587-605. https://doi.org/10.1108/03074351211226247

Publisher

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Emerald Group Publishing Limited

Copyright © 2012, Emerald Group Publishing Limited

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