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U.S. shareholder activism sees uptick in campaigns

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Apr 1, 2024
Average share of board seats won by U.S. shareholder activists
Data: Barclays; Note: Includes companies with more than $500 million in market cap at time of campaign announcement or in prior twelve months. Excludes campaigns without a public number of board seats demanded; Chart: Axios Visuals

U.S. shareholder activism notched its busiest two-quarter stretch since 2022, according to Barclays.

Why it matters: Changes in the proxy voting process and other factors have activist investors adjusting their strategies.

The big picture: Global activism was down during the quarter, while U.S. activists focused on the tech and consumer sectors for board and strategy shakeups.

  • The main driver of the falloff has been a drop in M&A. For years, the main demand of activist hedge funds was to push a company into a sales process.
  • With M&A down globally, activist campaigns have followed suit, with investors now forced to sharpen their focus.

Zoom in: Activism across the globe fell 19% in the first quarter to 63 campaigns, Barclays data show.

  • Director seats were activists' top demand in Q1, with nearly half of the global campaigns focused on board change.
  • Activists launched 29 U.S. campaigns in Q1, nearly equal to the same period a year ago.

Yes, but: Combining Q4 2023 and Q1 2024 (the period when most campaigns are launched), U.S. activism rose 7% to 73 campaigns total, compared to the same two quarters a year earlier.

  • During Q1, 45% of the U.S. activist campaigns were aimed at companies with a market value larger than $5 billion, a higher percentage than the trailing three-year period in a sign that hedge funds are going after bigger targets.
  • More than half of the campaigns launched in the U.S. focused on companies in the tech, industrial, and consumer sectors.

Between the lines: Forcing a company into a sale process is usually easier for an activist than getting one of its nominees appointed to a company's board.

  • With M&A continuing to lag (despite a recent spike), activists are being "surgical" in their approach to getting nominees onto boards to push changes, says Jim Rossman, Barclays' global head of shareholder advisory.
  • The data shows that activists during Q1 demanded fewer board seats during their campaigns but won a greater percentage compared to prior years.
  • Previously, activists typically won around two-thirds of the seats demanded. This quarter, that jumped to 79%, according to Barclays.

What's next: The biggest proxy fight of the year goes to a vote on April 3, with two seats on Disney's board being contested by Trian and its co-founder, Nelson Peltz.

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