Earlier this year, we published research revealing that public companies that settle with activists tend to underperform the market, on average, over the three years following the settlement. Specifically, we examined 634 settlements in the U.S. over 14 years (2010–2024) and found that in the aggregate, companies that settled with activists underperformed the S&P 500 by 7.1%.

These findings suggest that settlements do not generate positive returns for investors. The exception occurs when looking at companies that were sold within the same three-year period. On average, these companies outperformed the market by more than 15%. It should therefore not be a surprise when activists push companies to run a sale process.

In this second edition of our research, we took a closer look at the settlement data to determine if the addition of one or more activist principals to the board led to a different stock price outcome in comparison to settlements that only added independent directors (for clarity, “activist principal” means an executive that works for the activist fund; “independent” means a director that is not an employee of the activist fund. [1]) We also examined whether companies were more or less likely to sell themselves if an activist principal was added to the board versus only independent directors.

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