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How activist investor Bill Ackman forged an unusual alliance

Activist investor William Ackman, CEO of Pershing Square Capital Management, has teamed up with Canadian drug maker Valeant to make a joint run at buying Botox maker Allergan Inc.

BRIAN SNYDER/REUTERS

It is a marriage with roots in a Harvard Business School class that was sealed with a burrito from Chipotle.

The partnership between activist investor Bill Ackman and Michael Pearson, the chief executive of Valeant Pharmaceuticals International Inc., to mount a takeover of Allergan Inc. appears to have no precedent in the annals of deal-making.

So it's only fitting that the backstory is unusual, too. To trace the origin of the tie-up, you have to return to the 1990s, when Mr. Ackman was pursuing an MBA at Harvard. There he met a young man named William Doyle, who was assigned to the same group as Mr. Ackman for all required courses.

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The two became friends, though their paths diverged. Mr. Ackman started investing and later founded Pershing Square Capital Management LP. Mr. Doyle, meanwhile, joined McKinsey & Co. as a consultant, where his boss at one point was none other than Mr. Pearson.

Mr. Doyle went on to become an executive at Johnson & Johnson, where he once again worked with Mr. Pearson, and then started his own venture capital firm. All along, he remained friends with Mr. Ackman. Mr. Doyle serves on the board of a new organization devoted to cancer research together with Mr. Ackman, who helped found it.

Those personal connections would prove crucial. Last fall, Mr. Doyle joined Pershing Square as a senior adviser and introduced Mr. Ackman to Mr. Pearson. "Bill [Doyle] vouched for Mike," said Mr. Ackman at an event on Tuesday. "There was a lot of trust here."

Mr. Ackman and Mr. Pearson discussed a list of potential targets and agreed on Allergan. The hedge-fund investor conducted his own due diligence on Valeant, meeting board members and travelling to eastern Europe to understand its regional operations. By February, the two companies had signed an agreement to co-operate on the Allergan bid – a "simple, six-page document," according to Mr. Ackman. Pershing Square began buying Allergan shares on Feb. 25.

Mr. Ackman "was willing to invest $4-billion [U.S.] in us, in this transaction," said Mr. Pearson. "He has real credibility in terms of being a smart investor."

Among the many attributes of Valeant that Mr. Ackman described in glowing terms was its culture of thriftiness. At a recent meeting in the company's New York office, Mr. Ackman requested a burrito from a nearby Chipotle outlet instead of the lunch on offer. After the burrito arrived, "Mike walked into the conference room and asked me for $20," Mr. Ackman said. "I'm not sure I got the change."

The alliance between a corporate raider and a company's leadership – normally antagonists – is "highly unusual and may well be unprecedented," said James Cox, a law professor at Duke University. He expects to see more such activity in the future, particularly if the Pershing Square-Valeant bid for Allergan is consummated. "Nothing succeeds like success."

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About the Author
U.S. Correspondent

Joanna Slater is an award-winning foreign correspondent for The Globe based in the United States, where her focus is business and economic news and New York City.Her career includes reporting assignments in the U.S., Europe and Asia. In 2015, she was posted in Berlin, Germany, where she covered Europe’s refugee crisis. More

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