2016 Mid-Year Activism Update

Eduardo Gallardo is a partner focusing on mergers and acquisitions at Gibson, Dunn & Crutcher LLP. This post is based on a Gibson Dunn publication by Mr. Gallardo, Barbara L. Becker, Richard J. Birns, Dennis J. Friedman, and Adam J. Brunk. Related research from the Program on Corporate Governance includes The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon Brav, and Wei Jiang (discussed on the Forum here), The Myth that Insulating Boards Serves Long-Term Value by Lucian Bebchuk (discussed on the Forum here), The Law and Economics of Blockholder Disclosure by Lucian Bebchuk and Robert J. Jackson Jr. (discussed on the Forum here), and Pre-Disclosure Accumulations by Activist Investors: Evidence and Policy by Lucian Bebchuk, Alon Brav, Robert J. Jackson Jr., and Wei Jiang.

Our recent survey provides an update on shareholder activism activity involving domestically traded public companies with equity market capitalizations above $1 billion during the first half of 2016. Despite the uncertain domestic and international economic and political climates, shareholder activism continues to be common.

The survey covers 45 total public activist actions, involving 35 different activist investors and 38 companies targeted, during the period from January 1, 2016 to June 30, 2016. [1] Seven of those companies faced advances from multiple investors, including two companies that faced coordinated actions by two investors. [2] Equity market capitalizations of the targets range from just above our study’s $1 billion minimum to approximately $334 billion.

For the first half of 2016, both change in board composition, including gaining representation on the board (73.3%), and goals related to M&A, including pushing for spin-offs and advocating both for and against sales or acquisitions (53.3%), continued to be the most common objectives of activist investors. While large capitalization companies were not immune from activist pressure (10.5% of the companies included in our 2016 mid-year survey had equity market capitalizations above $20 billion), the majority of public activist actions involved small capitalization companies, as 55.3% of the companies in our survey had equity market capitalizations below $5 billion.

Our survey also covers 17 settlement agreements publicly filed in the first half of 2016. Within such settlement agreements, non-disparagement clauses, standstill periods and voting agreements all remain nearly ubiquitous, while we note an uptick in the number of agreements providing for other strategic initiatives (e.g., replacement of management, spin-off company governance, etc.) (82.4% in H1 2016 vs. 58.8% in 2014 and 2015). We delve further into the data and the details in the following pages.

In the complete publication (available here), we have included a chart of the activist campaigns covered by the survey and statistical analyses of various trends for H1 2016, as well as a survey of settlement agreement terms with breakdowns of settlement agreements publicly filed during the first half of 2016 and updated statistics on key settlement terms from 2014 through the end of H1 2016.

The complete publication, including charts and tables, is available here.


[1] 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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[2] The other five companies were subject to multiple activists acting independently.
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