In two recent memoranda by the law firm of Wachtell Lipton (Wachtell), The Bebchuk Syllogism (Syllogism memo) and Current Thoughts about Activism (Current Thoughts memo), the firm’s founder Martin Lipton and several other senior Wachtell lawyers strongly criticize our recent study, The Long-Term Effects of Hedge Fund Activism. Our study empirically disproves the myopic activists claim that interventions by activist hedge funds are in the long term detrimental to the involved companies and their long-term shareholders. This post responds to the main criticisms of our work in Wachtell’s memos. Below we proceed as follows:

• First, we discuss the background of how our study meets a challenge that Wachtell issued several months ago;
• Second, we highlight how Wachtell’s critiques of our study fail to raise any questions concerning the validity of our findings concerning long-term returns, which by themselves are sufficient to undermine the myopic activists claim that Wachtell has long been putting forward;
• Third, we explain that the methodological criticisms Wachtell directs at our findings concerning long-term operating performance are unwarranted;
• Fourth, we show that Wachtell’s causality claim cannot provide it with a substitute basis for its opposition to hedge fund activism;
• Finally, we explain why Wachtell’s expressed preference for favoring anecdotal evidence and reports of experience over empirical evidence should be rejected.

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