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Getting The Deal Through


Willem Calkoen and Stefan Wissing


Wednesday 05 June 2019

In 2018, shareholder activism was on the rise again: the number of new campaigns and companies publicly targeted reached a reported record high and activist assets under management remained at elevated levels.

While seasoned activist funds continue to be responsible for most of the high-profile activist campaigns, the number of new firms entering the activist space grew by almost 75 per cent, reflecting the continued expansion of activism as a tactic. Elliott Management stands out as it continued to be the most prolific and, in many cases, aggressive activist in 2018, publicly targeting 22 companies and having the largest market value of current activist positions (as reported by Lazard).

Against the backdrop of a robust M&A market during most of 2018, M&A-related activism was prevalent and ranged from instigating deal activity by pressing for splits, spins and sales (sometimes to the activist itself) to activists intervening in announced transactions by pushing for a price increase (bumpitrage). Elliott Management’s embrace of private equity strategies (eg, the buyout of Athenahealth) and transactions such as Starboard Value’s investment of up to US$250 million in Papa John’s through a PIPE transaction, fit a trend where the line between activism and private equity becomes increasingly blurred.

A record number of board seats was won by activists in 2018, both within and outside the US mostly through negotiated settlements rather than protracted public campaigns culminating in a shareholder vote. In many cases, settlements involved adding new independent directors with public company director experience rather than adding activist employees. The addition of ‘activist-minded’ directors to a board has an ongoing impact on companies after a campaign, as it changes the dynamics within the board and may cause changes in a company’s strategy that may culminate in M&A activity.

The stockmarket declines around the globe in the fourth quarter of 2018, offered activists attractive entry points for new positions while at the same time benefiting short activists. US debt markets showed a rise in default activism, where activists amass a large short position in corporate debt and then use a much smaller long position to assert that the company is in default on its corporate debt so that they can reap gains on their (net) short position (see Wachtell Lipton’s memo titled The Rise of the Net-Short Debt Activist).

Hedge fund activism and its economic consequences continued to be widely debated. A 2018 research paper by Ed deHaan, David Larcker and Charles McClure titled Long-Term Economic Consequences of Hedge Fund Activist Interventions found that ‘on a value-weighted basis, which best gauges effects on shareholder wealth and the economy . . . pre-to-post activism long-term returns are insignificantly different from zero’.

No company is immune to shareholder activism

Neither location or industry sector nor market cap or brand recognition make a company immune to shareholder activism.

While the majority of public campaigns and capital deployed is still targeting US companies, campaign activity increasingly has a global reach. Campaign activity in Europe and Asia-Pacific remained high compared with 2013 to 2016. US activists, led by Elliott Management with a record 13 European campaigns initiated in 2018, accounted for many of the activist campaigns outside the US.

As in previous years, activist campaigns targeted companies in a range of industries. While some individual managers target companies in specific sectors, activist investors as a whole do not display any clear preference for any particular sector (with many activist funds remaining industry generalists).

The top five sectors in terms of capital deployment and number of companies targeted in new campaigns were technology, industry, consumer, financial institutions, and infrastructure (including energy). Activists remain focused more on characteristics such as undervaluation based on corporate fundamentals, lagging stock performance relative to the market generally, low leverage or strong cash positions and announced or potential M&A than the industry in which the company operates.

The list of companies targeted by activist campaigns in 2018, or in which activists acquired a significant stake, spans a variety of sectors and includes large-cap companies and national champions such as Allergan, Altaba, Barclays, Bayer, BT Group, Campbell’s, Cigna, Citigroup, Deutsche Bank, eBay, Hyundai, Lowe’s, Nordea, Papa John’s, Pernod Ricard, PPG Industries, Sempra Energy, Sky, Thyssenkrupp, Telecom Italia, Toshiba, 21st Century Fox, Unilever, United Technologies and VMware.

Pure play activist hedge funds seeking to enhance corporate governance/ESG profile

With the vocal emphasis by the large passive index funds (BlackRock, State Street and Vanguard) on corporate purpose, environmental, social and governance (ESG) and long-term value creation, the rise of ESG-oriented activism by pension funds and other institutional investors, and to counter criticism that activists are too short-term focused, activist hedge funds are seeking to enhance their corporate governance and ESG profile.

For instance, at Elliott Management, Paul Singer’s 2017 commentary in the Wall Street Journal titled ‘Efficient Markets Need Guys Like Me’, in which he argued, among other things, that activists and index funds are natural allies, was followed up in 2018 by a newly created head of investment stewardship position aimed at cultivating better relations with index funds and other major institutional investors and enhancing Elliott’s profile by incorporating investors’ corporate governance priorities into the company’s campaigns.

Pure play activist hedge funds such as Trian Fund Management, ValueAct Capital and Elliott Management increasingly become members of, and attend conferences organised by, governance-focused organisations such as the International Corporate Governance Network and the Council of Institutional Investors.

JANA Partners announced plans to launch an impact investing fund, the JANA Impact Capital fund, which will focus more on ESG factors and social activism and is expected to formally launch this year. Ahead of the formal launch, JANA Partners already teamed up with CalSTRS in pushing Apple to develop new tools and provide insights to help parents address the overuse of Apple devices among young people.


Shareholder activism is expected to persist in 2019. Key trends that are likely to continue are:

  • a continued growth of the relative rate of activism outside the US, as activist hedge funds seek attractive opportunities across the globe;
  • pension funds and other institutional investors remaining vocal on environmental, social and (corporate) governance issues in the broadest sense, including diversity, board refreshment, environment, sustainability and climate change;
  • an increased embracing of diversity and ESG issues by, and integration of such ESG themes into campaigns of, traditional activist hedge funds; and
  • growing awareness within boards of the risk of becoming an activist target and the need to ramp up preparedness and effective engagement with major shareholders and other stakeholders.

Each jurisdiction has its own regulations and practices when it comes to shareholder activism and engagement. While the chapters in this book show there is growing convergence in certain areas, important differences remain between countries. We hope the concise jurisdictional overviews offer the reader a helpful first look at key activist-related topics in the various countries, enable convenient comparisons between jurisdictions and give food for thought as reading about the issues, practices and solutions in other countries often offer new insights and understandings relevant to one’s own laws and best practices.

We are thankful for having so many recognised thought leaders from around the globe contribute to this essential reference guide. We look forward to following future developments with great interest as the activist landscape continues to evolve.

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