Melissa Sawyer is a partner at Sullivan & Cromwell LLP. This post is based on a Sullivan & Cromwell publication by Ms. Sawyer, Marc Treviño, Lauren S. Boehmke, and Korey R. Inglin. 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); Dancing with Activists by Lucian Bebchuk, Alon Brav, Wei Jiang, and Thomas Keusch (discussed on the Forum here); and The Agency Problems of Institutional Investors by Lucian Bebchuk, Alma Cohen, and Scott Hirst.
Shareholder activist hedge funds grew modestly in 2017, not yet restoring global activist fund assets under management (“AUM”) to 2015 highs. Moreover, the rate of formation of new activist funds continued to decline, and the “winners” in this environment—those activists attracting the most new capital—seemed to be the well-established activists with strong brand names and track records of outperforming the market. Mirroring this development in fundraising, 2017 also saw a resurgence of campaign activity by frequent activists. Notably, these frequent activists appeared to focus on the largest companies, with activists targeting large-cap companies in over 21% of all campaigns (up from 19% in 2016). Large-caps like P&G, GE, General Motors, Nestle and ADP became notable targets. Despite this increased activity by frequent activists, the overall number of proxy contests and the number of board seats sought by activists both declined during 2017, continuing similar declines observed during 2016.