What's going on?

Two major deals to combine companies have come under threat this week from so-called �activist investors�… (tweet this)

What does this mean?

Jana Partners, a US investment firm, said on Monday that it had bought a stake in EQT, an American energy company. It hopes to use its clout to pump the brakes on EQT�s planned $7 billion purchase of another energy producer, Rice Energy � a deal that EQT says would create the biggest natural gas producer in the US! According to Jana, however, EQT should actually be downsizing if it wants to deliver more profits to its shareholders.

Then, on Tuesday, a team of hedge funds announced that it had taken a significant stake in Clariant, a Swiss chemicals manufacturer that�s merging with Huntsman, a US rival. The hedge funds seem to think that Clariant�s shareholders can get more value for their money with a better deal, either with Huntsman (at a higher price) or another company.

Why should I care?

For markets: A bit of activism was good for stock prices.

Clariant�s stock went up on Tuesday by almost 3%, presumably as investors were excited by the prospect of a new merger deal that could better reward Clariant�s shareholders � if the hedge funds can get their way. EQT�s stock also jumped after Jana announced its purchase of a stake in the company.

The bigger picture: There�s a risk that activist investors are thinking in the short term. �

Jana wants EQT to slim down rather than bulk up, which may be a good idea in the current tough environment, but it risks looking shortsighted if the natural gas industry improves. In Clariant�s case, it might find an interested party that will pay up more than Huntsman but that, perhaps, ends up being a poorer strategic partner. Overall, the risk is that activist investors are only looking to make a short-term impact and then sell their stake � and not to improve the companies� long-term ability to generate profits.