2018 sees all-time high in activism
Campaigns take sharp aim at Europe this year
NEW YORK— The number of companies targeted by shareholder activists hit an all-time high in 2018, as more investors launched campaigns, lobbied for and against deals and increasingly cast their eyes on Europe.
This spike in activity coincided with the return of billionaire Carl Icahn to the activist scene after a sojourn in Washington as a special adviser to U.S. President Donald Trump. Icahn pushed for higher prices on several transactions, including Michael Dell’s plans to return his eponymous tech giant to the public markets and Amtrust Financial Services’ plans to go private. He also broke up Fujifilm Holdings Corp.’s takeover of Xerox Corp. “Activism against M&A reached an all-time high this year,” said Kai Liekefett, partner and chairman of the shareholder activism practice at law firm Sidley Austin LLP, noting Icahn led the charge. “He’s about to perfect the art of getting higher deal prices out of buyers.”
Activists have fought a total of 240 activist campaigns against 218 companies with a market value of more than $500 million (U.S.) so far in 2018, according to data collected by Lazard Ltd. That compared to194 campaigns against 169 corporations last year. The total number of funds leading campaigns rose to 133, up from 109 last year and 49 five years ago, the data show.
In all, a record 160 seats on boards were awarded to activists in 2018, up from 100 a year ago and the previous peak of145 in 2016.
The increase is, in part, due to more first-time and non-traditional activists agitating for change, said Jim Rossman, head of shareholder advisory at Lazard. More established activists are also shifting the paradigm by shunning traditional proxy fights. Instead, they’re being more vocal earlier, telling corporations what changes they think are necessary to avoid a messy and costly public fight.
Dan Loeb’s Third Point, for example, released open letters at Nestle SA and told its own investors what it would like United Technologies Corp. to change. Bill Ackman has also openly discussed his Pershing Square Capital Management’s investments in United Technologies and Starbucks Corp.
“It doesn’t add to the value of an asset to have the manager distracted in a proxy fight,” Rossman said.
“If they can help the company and the activist avoid a proxy fight, they’re going to express their view. It’s an elevation of the game.”
Activists are also more frequently running so-called wolf pack campaigns, said David Dubner, recently appointed cohead of Goldman Sachs Group Inc.’s activism and shareholder advisory for the Americas. That’s where several firms group together to create a block that owns a substantial chunk of a company’s shares.
Paulson & Co., the New York hedge fund run by billionaire John Paulson, led a campaign that this month replaced the majority of the board at Canada’s Detour Gold Corp. Paulson teamed up with at least three other investors who voted in a bloc to overcome a recommendation from two shareholder advisory firms that fewer of the dissident directors be elected.