We study the role of hedge fund activists in curbing empire building. We show that firms with poor acquisition records are more likely to become activist targets. Following activist intervention, targeted firms make fewer acquisitions but obtain substantially higher abnormal returns. These firms avoid large transactions, diversifying deals, and refrain from announcing deals during merger waves. After an activist campaign, targets increase the pace of divestitures and achieve higher announcement and long-term returns from divestitures than firms without activist intervention. Our results are consistent with a treatment effect whereby the activists’ interventions both improve their targets’ acquisition strategy and lower reluctance to divest assets. Our findings highlight an important channel through which activists improve the efficiency of public companies.