Тhree reasons why the tail wags the dog in shareholder and predator-prey relationships

Predators and hostile takeover funds use leverage and aggression to take control
George ILIEV

(Shark in the shallows, Whitsunday Islands, Australia, 2012)

It is often the case that smaller size predators come on top of larger prey in the food pyramid, just like minority shareholders often control large corporations. There are at least three types of factors that underlie this phenomenon of "the tail wagging the dog" in nature and in the business world.

1. Pre-programmed aggressive/activist behaviour.
2. Access to leveraging tools.
3. Diffuse reaction of the target of control.

1. Whereas the lion has an instinct to hunt zebras and antelopes, no zebra would feel an urge to chase lions. (Though jays and meerkats are known to attack their predators.) By the same token, shareholders who want to control a corporation are, by and large, aggressive and activist investors who have done this multiple times.

2. Just like the lion has teeth and claws, activist shareholders have access to leveraged finance (bank loans) and privileged information.

3. Prey rarely organise themselves to defend against a predator. In a similar way, the diffuse ownership structure of a corporation may allow a small shareholder to gain effective control of the whole entity. A case in point is Marco Provera, who controlled Telecom Italia in the early 2000s by leveraging his stake 26-fold. Worldwide, 737 top shareholders have the potential to control 80% of all Trans-national corporations around the world, the same TED talk shows.