2021 Shareholder Activism Highlights
"Anti" M&A Activism
While the absolute number of companies publicly facing activist demands regarding M&A transactions decreased in 2021 vs. 2020, M&A activism represented an increased share of overall economic demands of activists in 2021. Although the relative count of M&A activism was on the rise this year, the form of activism has changed notably from years past. Many of the significant M&A activism situations in 2021 have been reactive—that is, instead of pushing for boards to consider a transaction, activists have responded to publicly announced transactions by pushing for shareholders to vote down a deal, or for boards to increase the transaction value or for boards to restructure transactions altogether. Most of the anti-M&A activism has focused on price, with demands largely placed at small-cap and mid-cap companies. Activists have found significantly more success in 2021 in M&A activism than in years past.
Part of this trend can be credited to volatile equity markets and increased transaction multiples in M&A transactions. Private equity firms with ample dry powder have pushed up valuations for assets. Activist investors have pounced on these frothy enterprise values as evidence that buyers in 2021 are willing to put additional capital to work to gain the support of key shareholders and guarantee a transaction closing. As a result, fewer activists have put companies in play than in years past; instead, activists have generally waited to go public until on or around the announcement of a strategic transaction.
Continuing Trend of Activist as Acquiror
Certain activists have built up credibility as potential buyers of public companies in recent years—Elliott Management and Senator Investment Group are two notable examples of funds that have evidenced a genuine desire for and capability of acquiring a public company (including through hostile measures). However, many market participants continue to question whether the "average" activist investor would be willing (or able) to park a significant quantum of capital in a single asset for a lengthy period of time.
An interesting development in 2021 was activist-led SPACs presenting an opportunity for activists to become buyers in go-public transactions. Certain activists, including Third Point Partners, have gone so far as to raise capital specifically for SPAC investments. However, as has been common in SPAC transactions generally, activist-backed SPAC deals have faced scrutiny including shareholder litigation (e.g., a transaction involving Pershing Square). 2022 should provide some clues as to whether SPAC investing will provide a continued avenue for activists to seek additional alpha or whether it will be but a flash in the pan that ultimately will give way to more traditional public investing by activist hedge funds.
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