“Activism as an asset class has delivered better returns with less risk,” according to Mark Shafir, co-head of global M&A for Lehman Brothers, speaking at the Tulane’s Corporate Law Institute conference in New Orleans.

Speaking about the trough in M&A activity this year, Shafir said corporate clients have become more aggressive and institutional investors are now more supportive of hostile or unsolicited deals.

Take, for example, the 72 proxy fights that have occurred so far in 2008, compared with 107 fights in all of 2007 and 100 in all of 2006.

“We spend a lot of our time in that space,” Shafir said.

The trend will be explored more at the Tulane annual M&A conference’s panel discussion called “Barbarians at the Ballot Box.”

Shafir spent most of his speech talking about the dip in deal volume, including a retreat from major private equity players and the tightening of the credit markets.

He said deal volumes are expected to fall to $2.5 trillion this year – after a record of $4.5 trillion in deals in 2007. Shafir said the decline in M&A volume has been sharper than anticipated and also foresaw a larger number of busted deals in the coming year.

Shafir predicted a “return to basics” in the industry such as splits and spinoffs, initial public offerings of company units, and joint ventures.

Shafir said credit markets would not return to normalcy for “quite some time,” adding that the credit market difficulties and the economic downturn have hit the M&A market with a “double-whammy.”

Talking about the reversal of fortunes in the M&A industry, Shafir went on to say that if Robert Kindler (a vice chairman at Morgan Stanley who spoke at last year’s conference with great optimism about the new records in the deal-making space) was in the room, “I’d want to kill him.”

But Shafir still ended his talk on a high note. He said 2008-2009 deals would be characterized by more strategic efforts, continued rise in cross-border activity, increased shareholder activism and a rise in sovereign wealth funds.

“A case for optimism remains,” he said.

Deal or no deal, hope remains.
(Reporting by Jui Chakravorty)