Review of Shareholder Activism: 1H 2018

Jim Rossman is head of Shareholder Advisory, Chris Couvelier is Director, and Kashyap Shah is an Analyst at Lazard. This post is based on a Lazard publication by Mr. Rossman, Mr. Couvelier, and Mr. Shah, Mary Ann Deignan, Dennis Berman, and Rich Thomas. 

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 Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System by Leo E. Strine, Jr. (discussed on the Forum here).

Key Observations on the Activist Environment in 1H 2018

1. New campaigns initiated and capital deployed by activists reached record levels in 1H 2018

  • 1Q 2018 and 2Q 2018 were the two most active quarters ever, resulting in a record 145 new campaigns launched against 136 companies in 1H 2018
    • Elliott’s 17 new campaigns in 1H 2018—nearly three times the level of the next most prolific activist—accounted for ~12% of all activity
  • An all-time high ~$40.1bn of capital was deployed by activists in new campaigns in 1H 2018, representing a ~6% increase over the same period last year
  • The broadening use of activism as a tactic continued, with 104 investors (including 20 “first timers”) launching new campaigns in 1H 2018

2. Activists won more Board seats in 1H 2018 than they did in all of 2017 and are on pace to significantly surpass 2016’s record level by year end

  • The 119 Board seats won by activists in 1H 2018 represent a ~75% increase over the same period last year
    • Starboard, Elliott, and Icahn alone accounted for ~45% of all Board seats won in 1H 2018
    • In line with recent trends, ~85% of Board seats won by activists came via settlement, suggesting a strong aversion to proxy fights
  • Activists pursued “long-slate” nominations—seeking to replace at least 50% of the Board —in one third of all Board representation campaigns in 1H 2018
  • The activist toolkit for affecting Board composition in 1H 2018 also included running withhold campaigns and challenging nomination deadlines

3. Aside from seeking Board change, M&A objectives—whether catalyzing a sale, opposing the terms of an existing deal or pushing for a break-up—were the most common in 1H 2018

  • An M&A-related thesis arose in ~34% of campaigns launched in 1H 2018, on par with 2017 levels

4. Global targets remained in the activist crosshairs in 1H 2018, with high-profile instances of US-style activism occurring in both Europe and Asia

  • European targets accounted for nearly one-quarter of all activist capital deployed and campaigns launched in 1H 2018
    • Elliott’s 10 campaigns launched against European targets alone accounted for ~30% of all campaigns in Europe
    • UK companies remained by far the most targeted, representing ~55% of all activity in Europe
  • Notable activity by US activists in South Korea (Hyundai Motors), Japan (Olympus) and India (Fortis Healthcare) confirms activism’s global reach

The complete publication, including Appendix, is available here.

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