The Activist Investing Annual Review 2017
New York, February 1, 2017 — The Activist Investing Annual Review 2017, produced by Activist Insight in association with Schulte Roth & Zabel (SRZ) was released today, analyzing 2016 trends in shareholder activism, ranking the “Top Ten” activist investors and providing predictions for the year ahead.
Highlights from the review:
Activists targeted 758 companies worldwide in 2016, a 13% increase from 2015’s total of 673.
The number of companies facing public activist demands outside the United States surged to 302 in 2016, up from 255 a year before, driven by greater interest in Asia and opportunities created by volatile European currencies.
In 2016, the number of companies targeted by activists rose 9% in the United States, 35% in Europe and 48% in Asia.
Click here for a PDF of the review.
Marc Weingarten and Eleazer Klein, SRZ partners and co-chairs of the firm’s global Shareholder Activism Group, contributed expert commentary to the review. The publication also features Jim McNally, London-based shareholder activism, corporate and funds partner, and Michael E. Swartz, New York-based litigation partner who advises on shareholder activism litigation.
SRZ is well-known for its premier, market-leading practice handling all types of shareholder activism situations, from the straightforward to the most complex and sophisticated campaigns. In January 2017, leading shareholder activism lawyer Aneliya S. Crawford joined SRZ as a partner in the New York office. She has represented activist investors in connection with more than 100 major shareholder activism campaigns, including many high-profile matters.
Addressing the review’s findings, Mr. Weingarten commented, “The large caps are recognizing that activism is here to stay, and many have proactively taken the steps to enhance shareholder value that an activist otherwise might have sought.” Mr. Klein added, “Companies are also examining campaigns more closely and checking more frequently with the institutional investors to see what they want.”
Activist Insight’s Josh Black, editor of the review, outlined some of the obstacles investors are facing. “With markets rallying, interest rates rising and a number of regulatory initiatives designed to clip their wings, 2017 could be another challenging year for activists,” he said.
“Together with Activist Insight, we are pleased to present this report. This annual publication serves as a valuable resource for key players in the activism market,” stated Alan S. Waldenberg, chair of SRZ’s Executive Committee.
The Activist Investing Annual Review 2017 also features “The Activist Top Ten,” with Elliott Management topping the list for the second year in a row. Activist Insight selects the list based on the number of campaigns, average size of targets, news stories generated and annualized returns.
“The Activist Top Ten 2016” are:
Elliott Management
Starboard Value
Carl Icahn
Corvex Management
GAMCO Investors
Mangrove Partners
Allan Gray
Amber Capital
Bulldog Investors
Teleios Capital Partners
Onward and upwards
Marc Weingarten and Eleazer Klein, co-chairs of Schulte Roth & Zabel’s global Shareholder Activism Group.
A change in the mix
While activist campaigns may not have commanded as many newspaper front pages in 2016 as they have in recent years, this reflected more of a down-market shift in activist targets and not any retreat by shareholders. Many activists focused on smaller targets during the year, while some of the largest and most-feared activists had a quieter year retrenching in the aftermath of lesser performances in 2015. Nonetheless, the number of activist investments across the globe actually slightly increased versus the previous year, although there was a slight decline in North American volume.
There were a myriad of contributors to this pause in the growth of shareholder activism. Many of the major activist funds had their first down years in 2015, led in some cases by the collapse of Valeant’s stock and poorly-timed energy bets, and their losses continued into the first quarter of 2016. As a result, they were more focused on investor relations and increasing liquidity than taking on new large cap campaigns (with Elliott and Starboard Value being major exceptions). The uncertainty resulting from the “Brexit” bombshell and the U.S. election also slowed activity. But much of that macroeconomic uncertainty has now been resolved, with Brexit going “hard” and the Trump administration firmly in place, and with more positive returns for the major activists during the balance of 2016 and their investor base stabilizing, we are expecting more action in the large cap space this year. With the newlyensconced Paul Hilal pursuing CSX, this trend is already underway.
Rise of the occasional activist
As “reluctivists” have been emboldened by the success of activist investors, the occasional activist is becoming a more familiar sight. More and more investors who would never call themselves activists have entered the activism arena. Occasional activists are almost always long-term investors in their targets and typically have engaged with management for many months – if not years – before resorting to the activist playbook. Investment managers fed up with a portfolio company’s management and lack of progress have recognized that activist engagements can be a useful tool to catalyze the changes needed to deliver returns. These funds often believe that their role as fiduciaries for their investors requires them to sometimes pursue an activist strategy, instead of simply disinvesting. Our clients Altimeter Capital, with a successful campaign at United Airlines, and St. Denis J. Villere & Company, which pushed Epiq Systems to a sale, typified the sector. And 2016 saw several more traditional managers turn into occasional activists, like Neuberger Berman at Ultratech and T. Rowe Price at NetSuite.
Redefining proxies in the United States
In 2016, the Securities and Exchange Commission released a long-awaited proposal for universal proxies at the behest of our client, the Council of Institutional Investors.
The proposal would require the use of universal proxies in election contests, in order to enable shareholders to vote for the combination of board nominees of their choice and replicate the action they could take by attending a shareholder meeting in person. While activist defense advisers have reactively decried universal proxies as tilting the playing field to favor activists, which in fact is not the case, they would certainly change the dynamics in proxy contests. With the change in administrations, and at the SEC, it remains to be seen whether this proposal has legs.
Back on the growth track
So following a bit of a pause last year, we see the activist sector returning to its historic growth trajectory, not just in the United States but on a more global basis as well. And preparing for that growth, we welcome our new partner, Aneliya S. Crawford, to our activist team at Schulte Roth & Zabel. Onward!
Hype and humility
Shareholder activism proliferated in 2016, but dedicated activists were responsible for fewer than half of global campaigns thanks to volatility and smaller war chests, reports Josh Black. Getting heard above the crowd may be harder in 2017.
The juggernaut of shareholder engagement kept rolling in 2016 as a surge of one-off campaigns, governance-related proposals and remuneration crackdowns made for a busy year. 758 companies worldwide received public demands – a 13% increase on 2015’s total of 673 – including 104 S&P 500 issuers and eight of the FTSE 100. Yet for dedicated activist investors, it was a more muted affair. Investors deemed by Activist Insight to have a primary or partial focus on activism targeted fewer and smaller companies, accounting for just 40% of the total which
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