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E-MailBarbara L. Becker is partner and co-chair of the Mergers and Acquisitions Practice Group at Gibson, Dunn & Crutcher LLP, and Eduardo Gallardo is a partner focusing on mergers and acquisitions, also at Gibson Dunn. The following post is based on a Gibson Dunn M&A Client Alert. The full publication, including charts and survey of settlement agreements, is available here.
This post provides an update on shareholder activism activity involving domestically traded public companies with market capitalizations above $1 billion during the second half of 2015, together with a look back at shareholder activism throughout 2015. While many pundits have suggested shareholder activism peaked in 2015, shareholder activism continues to be a major factor in the marketplace, involving companies of all sizes and activists new and old. Activist funds managed approximately $122 billion as of September 30, 2015 (vs. approximately $32 billion as at December 31, 2008). [1] In 2015 as compared to 2014, we saw a significant uptick in the total number of public activist actions (94 vs. 64), involving both a higher number of companies targeted (80 vs. 59) and a higher number of activist investors (56 vs. 34). [2]
In this edition of Activism Update, our survey covers 44 public activist actions involving 38 different companies by 29 different activist investors during the period from July 1, 2015 to December 31, 2015. Five of those companies faced advances from at least two activist investors, including two companies that faced coordinated actions by two investors. [3] Market capitalizations of the targets ranged from just above our study’s $1 billion minimum to approximately $294 billion.
While change in board composition, including gaining representation on the board, predictably continued to be a common goal of activist investors (66%) in 2015, over half of the activist actions we reviewed in 2015 included goals related to M&A, including pushing for spin-offs and advocating both for and against sales or acquisitions (59%). High market caps continue to not deter activists from making advances, as 23% of the companies included in our 2015 surveys had market capitalizations above $20 billion. Though proxy solicitations in the second half of 2015, outside of proxy season, were less common than in the first half of the year (5% in H2 vs. 25% in H1), the second half of 2015 saw nearly as many publicly filed settlement agreements as 2015’s first six months (10 in H2 vs. 12 in H1).
Overall in 2015, proxy solicitations took place in only 19% of campaigns, and settlement agreements were publicly filed in 23% of campaigns. Within such settlement agreements, non-disparagement clauses, standstill periods and voting agreements all remained nearly ubiquitous, but expense reimbursements have grown increasingly rare (10% in H2 2015 vs. 37.5% in 2014 and H1 2015). We delve further into the data and the details in the following pages.
While proxy campaigns by activists and formal settlement agreements continue to be the exception rather than the rule, companies do appear to be taking proactive measures in anticipation of or in response to activists, including board or management changes, corporate governance reviews, stock buybacks and strategic initiatives.
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The full publication, including charts of the activist campaigns covered by our survey, the survey of settlement agreement terms with breakdowns of settlement agreements publicly filed during the second half of 2015, and updated statistics on key settlement terms from 2014 through the end of 2015, is available here.
Endnotes:
[1] Hedge Fund Research
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[2] Several companies faced actions from multiple activist investors, some of whom were acting in concert while others were acting independently vis-à-vis the target.
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[3] The other three companies were subject to multiple activists acting independently.
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