Activist Investors Set New Record in Corporate Showdowns

Last updated: January 7, 2024

In 2023, companies experienced an unprecedented surge in challenges from activist investors, with a record 252 new campaigns worldwide, as reported by investment bank Lazard. This 7% increase from the previous year saw prominent companies like Walt Disney, Salesforce, and Starbucks under scrutiny.

The activism trend was particularly notable in Europe and Asia Pacific, with the UK and Japan leading in the number of campaigns.

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Rich Thomas from Lazard’s capital markets advisory group noted the distinct regional dynamics of these campaigns, attributing the global rise to significant activity in these regions.

Traditionally, activist investors, often hedge funds, purchase company stakes and push for changes to boost share prices. While earlier activism was more public, recent trends show much negotiation happening privately.

However, some high-profile disputes have emerged publicly. Notably, Trian Partners targeted Disney, seeking board seats in a contentious fight involving co-founder Nelson Peltz and CEO Bob Iger. Another example is Carl Icahn’s aggressive campaign against Illumina over its acquisition of Grail, which eventually led to Illumina’s divestiture from Grail.

Increasingly, activism is not just the domain of hedge funds like Elliott Management and Third Point. In 2023, over 40% of activist campaigns were initiated by first-time activists, indicating a broadening range of dissatisfied investors.

Europe, in particular, saw a rise in first-time activists, encouraged by the easing of previously restrictive factors like the cost of living crisis and energy prices.

A noteworthy campaign involves Starbucks, where the Strategic Organizing Center, a coalition of labor unions, is pushing to replace three directors due to alleged mismanagement. This potential proxy fight highlights the evolving nature of shareholder activism, where even smaller shareholders can pose significant challenges to corporations.

Despite the introduction of universal proxy rules in 2022, which aimed to streamline board elections, their impact on the success rate of activist campaigns appears minimal.

However, companies are increasingly seeking quick settlements with activists to avoid prolonged disputes. In 2023, only 37% of campaigns aiming for board representation exceeded 90 days, a decrease from previous years.

The year also saw multiple hedge funds converging on the same targets, as observed in companies like Salesforce, which at one point had seven activists, including ValueAct, Elliott, and Third Point, on its shareholder register.

Bruce Goldfarb, founder of Okapi Partners, notes this trend as a significant shift, where large companies are now more vulnerable to these ‘wolf pack’ strategies due to the larger positions required by hedge funds to impact their investments.

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