Campaigns pushing companies to acquire other firms or sell themselves nearly doubled between 2013 and 2014, annual review shows
Shareholder activists were more dynamic than ever before in 2014, launching 18 percent more campaigns than the previous year and raising record levels of cash to pursue their agendas according to the latest report on shareholder activism published by Activist Insight.
According to The Activist Investing Annual Review 2015, which was produced in cooperation with Schulte Roth & Zabel, activists launched 344 campaigns globally last year compared to 291 in 2013. They widened their reach as well: the number of companies that had no prior run-ins with activists over the last five years grew from 210 in 2013 to 249 last year.
The amount of money poured into activist campaigns grew significantly as well. The website Activist Insight Online shows that the value of all stock holdings held by activists totals more than $237 billion, with at least five activist fund managers having more than $10 billion at their disposal. It also lists nearly 500 entities that are involved in activist activities. The report says that with the number of players growing and with such financial firepower available, the influence of activist investors is sure to grow in 2015.
Of course money is not the only reason activism may increase in 2015. Josh Black, managing editor of Activist Insight and editor of the report says activists may be more active because ‘tougher markets for certain stocks may mean more focus on underperforming companies, particularly in light of the oil price crash… That said, if M&A continues to increase, activists will increasingly involve themselves in companies affected by that changing reality.’
Indeed, the report shows that M&A was a major catalyst for activists. In a statement, Activist Insight said, ‘Activists increasingly sought to drive companies into M&A activity. Proactive M&A campaigns, where activists sought to push companies to acquire other firms or sell themselves, nearly doubled from 36 to 68 instances between 2013 and 2014. Reactive M&A, typified by opposition to deals or their terms, more than halved from 26 to 12 over the same period.’
The report also shows the number of activists running public campaigns, such as demanding board representation or forcing strategic alternatives, rising for the fifth straight year. Activists ran 203 public campaigns in 2014 compared to 160 in 2013 and 150 in 2012.
The comparative levels of success that activists enjoyed last year are also chronicled in the report. Starboard Value, which had the highest profile campaign by engineering the ouster of Darden Restaurants’ entire board of directors, ranked highest on the 'Activist Top Ten' list for 2014, followed by Third Point Partners, Jana Partners, Icahn Enterprises, Gamco Investors, Elliot Management, Pershing Square Capital Management, Trian Partners, ValueAct Capital and Corvex Management as the most successful activists during a banner year for campaigns. ‘In 2014, 74 percent of activist demands were at least partially successful, a significant increase from the 67 percent seen in 2013,’ the report reads, adding, ‘The data points to a single conclusion—it is getting easier for activists to achieve their objectives and harder for companies to reject their demands.’
How should companies prepare for an environment of increased activism? In Corporate Secretary’s 2015 proxy season preview, Georgeson senior managing director Rajeev Kumar suggests companies seek help from proxy solicitors as they try to address possible issues that could attract activist campaigns. ‘Proxy solicitors can be helpful in determining shareholder makeup and coming up with probable vote outcomes,’ he says. They can also forecast different scenarios showing various levels of shareholder support for a range of governance issues.
Chris Ruggeri, principal and US M&A leader for Deloitte subsidiary Deloittte Transactions and Business Analytics says that there is wide recognition now that investors are company owners, and management and boards can’t ignore their demands. ‘Finding a protocol for engagement with investors is going to continue to be explored,’ she says. ‘We are seeing some companies now putting in place policies for shareholder engagement…communicating to the market the protocol by which shareholders can engage with the company.’
Ruby Sharma, a principal at Ernst & Young and the EY Center for Board Matters, advises companies to ‘view the business through an activist lens from a financial and operational perspective, but also from a governance perspective. Make sure you are prepared by taking action and having a fully thought-out plan that everyone, from board to management, understands.’
