Arthur B. Crozier is Chairman and Gabrielle Wolf is a Director at Innisfree M&A, Inc. This post is based on their Innisfree memorandum. 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).
Activism In Context: Where We’ve Been, Where We’re Going [1]
Depressed Activism in H1 2020 Comes Rearing Back in Q4
COVID depressed activism campaigns in H1 of 2020 to the lowest level since 2014, as many activists recognized that proxy contests would distract issuers from focusing on the urgent task of adapting their businesses to a volatile market and changing world. Activists were also surely wary of appearing to take advantage of unanticipated market dislocation, due to concerns that such efforts would not be favorably viewed by institutional investors in particular, whose votes are crucial to winning proxy contests. That said, as the pandemic and resulting lockdown lasted longer than first anticipated and businesses successfully adapted, activists arose from hibernation and launched 30 new campaigns in Q4 2020. [2] According to Lazard, the number of U.S.-based activist campaigns in Q4 2020 represented a 200% increase from Q3 2020 campaign numbers and 34% of all 2020 campaigns. Of particular interest, one-fifth of the dramatic Q4 uptick was focused on targets with a market capitalization of at least $25B, [3] including Comcast, Disney, Public Storage, Intel and ExxonMobil.
Despite its slowdown in 2020, several developments, particularly in the last half of 2020, are likely to continue and to define the state of activism in 2021.