Shareholder activism campaigns reached an all-time high in 2015, with companies and investors exhibiting more of a willingness to strike a deal.
Shareholder activism (also called investor activism) is the intervention by shareholders in the running of a company. Activist shareholders put pressure on management to take (or refrain from) various actions such as: forcing the spin-off of business, blocking take-overs or limiting the price at which they occur, limiting directors pay and firing directors, forcing a change of strategy and imposing CSR policies.
Thomson Reuters recorded a total of 507 shareholder activism campaigns during the full year 2015, shattering the prior record of 396 campaigns in 2012.
The number of campaigns in 2015 also represented a 73.6 percent increase from the 292 campaigns in 2014.
“The dramatic increase in campaigns can be attributed in part to the record breaking mergers and acquisitions rebound in 2015,” says Jey Tiourchi, Thomson Reuters Corporate Governance and Legal Advisory Deals Manager.
The fourth quarter of 2015 totaled a record-breaking US$1.6 trillion in M&A activity, a 50% increase by value compared to the third quarter of 2015 and marked the third consecutive trillion-dollar plus quarter for worldwide M&A since records began in 1980 (Source: Thomson Reuters Deal Making Intelligence).
Along with the spike in shareholder activism efforts, Thomson Reuters found that settlements between investors and public companies became more commonplace. Activist shareholders achieved a partial and outright win rate of 3.8 and 24.4 percent in 2015, which was lower than in the prior two years. The number of settlements between investors and shareholders however, increased during the same time frame.
Shareholder activism occurred across a wide variety of industries but was most common in the consumer cyclicals and financial sectors. Thomson Reuters documented a total of 99 shareholder activism campaigns in the consumer cyclical industry, slightly ahead of the 97 campaigns in the financial sector. The technology and industrial sectors followed, with 82 and 80 campaigns, respectively.
Shareholder activism at large companies was also common in 2015. Fifteen companies with a market cap of at least $25 billion were the target of a shareholder activism campaign in 2015, up from nine such companies the prior year, but shy of the record of 18 in 2013.
“Shareholder activism is now an accepted tactic in the financial markets,” says Tiourchi. “The pre-2008 negative connotations have evolved with activity now seen to deliver more positive change, forcing management to seek alternative actions to benefit shareholders and deliver greater value.”
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