Abstract
This paper analyses whether acquiring firms with activist hedge fund (AHF) ownership pay higher premiums in acquisitions driven by a “labour cost reduction” motive. The results indicate that the AHF ownership in the acquiring firms is not associated with the size of the premium. They also suggest that the premiums paid in acquisitions with a “labour cost reduction” motive are significantly different from the premiums paid for other acquisitions, but only when the acquiring firm has an AHF block-holder (large shareholder). Overall, these findings suggest that acquiring firms with AHF ownership expect higher labour cost savings and, therefore, agree to pay high premiums.