Investor Relations

CFOs Dealt With a Record Number of Activist Investors in 2019

A record 99 campaigns globally had an M&A-related thesis, accounting for about 47% of all the year's activity.
Vincent RyanJanuary 15, 2020

Across the globe, a record 147 investors (up from 131 in 2018) launched new activist campaigns in 2019, including 43 “first-timers” with no prior activism history, according to Lazard’s annual shareholder activism review.

Those activists targeted 187 global companies, down 17% from 2018’s record but in line with multi-year average levels, Lazard said. (The numbers reflect only campaigns aimed at companies with $500 million in market capitalization or higher.)

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AT&T became the largest targeted U.S. company of 2019 last fall, when it resolved a dispute with Elliott Management by promising “significantly enhanced operational efficiency with meaningful margin expansion,” a “full review of the portfolio,” and “no more major acquisitions.”

A record 99 campaigns globally had an M&A-related thesis, accounting for about 47% of all the year’s activity, up from an average of 35% in prior years.

Investors deployed $24 billion in those merger-related campaigns (out of an aggregate $42 billion for all campaigns during the year). The technology sector saw $7 billion deployed in M&A-related activist moves (out of a total $9.3 billion in new activist positions for the sector).

Most notably in tech during 2019, Icahn Enterprises urged HP to merger with Xerox, Elliott Management and Starboard Value pushed eBay to divest non-core assets, and D.E. Shaw urged an independent review of Emerson’s cost structure and organization.

Last year also saw a continued decline in the number of U.S. targets and an increase in activity in Japan and Europe. For the first time, Japan was the most-targeted non-U.S. jurisdiction, with 19 campaigns and $4.5 billion in capital deployed.

Notable campaigns in the country included investor Oasis demanding the divestment of non-core units by Seven & i Holdings and Third Point’s request that Sony divest its image sensors business.

Overall European activity decreased in 2019 (48 campaigns, down from a record 57 in 2018), driven primarily by 10 fewer campaigns in the United Kingdom.

Across all geographies, activists won 122 board seats, in line with the multi-year average. The majority of board seats were secured via negotiated settlements. One-fifth of the seats went to female directors, compared with a rate of 46% for all new S&P 500 director appointees last year.

A record 20 “long slates” (director slates defined as instances where an activist nominated directors to replace 50%-plus of the incumbent board) secured seats in two-thirds (67%) of the situations that have been resolved so far.

While activists like Elliott and Starboard continued to dominate in terms of number of campaigns deployed, 2019 saw many traditional long-only investors go after company management. Those investors included Artisan Partners, T. Rowe Price, Neuberger Berman, and M&G Investments.

At the same time, actively managed investment funds saw $176 billion in net outflows through the third quarter of 2019, compared with $105 billion over the same period a year earlier. The “Big 3” index funds (BlackRock, Vanguard and State Street) continue to be the primary beneficiaries of passive inflows, Lazard said, collectively owning about 19% of the S&P 500, up from about 16% in 2014.