Shareholder Activism Insight

Corporate advisers had predicted, or at least hoped, that a combination of factors – increased competition in the activist sector, fewer attractive targets, increased engagement by institutional investors and some poor returns in 2015 and early 2016 – would stem the rise of shareholder activism in 2016. While the headwinds led some to believe that activism must have peaked, the activists are having none of it and continue to expect the level of activism to rise. The market has evolved into a complex dance between public companies familiar with the classic activist playbook, newcomers making forays, and seasoned players engaging in unique types of campaigns.

If anyone thought that the vulnerability of multi-billion dollar behemoths such as Apple, Allergan, DuPont and Yahoo in the past two years was an anomaly, activists’ large cap campaigns in 2016 were a wake-up call. The number of campaigns at large cap companies for the first three quarters of 2016 has already surpassed the total number of such campaigns in 2015 by 20%. Given the finite number of large cap companies, however, activists in our survey reported that they do not anticipate significant future activism in the largest companies, with over two-thirds of respondents predicting little to no activist opportunities in the mega cap sector.

With companies now well-studied in classic activist campaign tactics, those targeted by activists know better than to pull from the old bag of tricks like poison pills, shareholder-unfriendly bylaw amendments and litigation. Companies have come to understand that to stand a chance, they must engage in early and open dialogue with investors – both active and passive. Where in the past activists often criticized companies for aggressively attacking their shareholders, many companies have pulled from the shareholder playbook and now regularly accuse agitating shareholders of “not playing nice.”

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What do you expect to happen to the volume of shareholder activism campaigns over the next 12 months?

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