This paper studies the role of blockholders and activist investors in the market for corporate control. We argue that activist investors complement the e¤ort of bidders to acquire companies by relaxing the resistance of incumbent boards to takeovers. Using this insight, we show that there is strategic complementarity between the search of activist investors for ...rms that are likely to receive a takeover bid, and the search of corporate buyers for targets with which they can create synergies.

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... mong other implications, strategic complementarity implies that the aggregate M&A activity is positively related to the intensity of shareholder activism, and gives rise to unpredictable episodes with high and low volume of transactions. Finally, our model provides empirical predictions on the interaction between shareholder activism and M&A activity, and a framework to study the implications of treatment and selection e¤ects.