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    INVESTMENT BANKING | INNOVATION EDGE

    Shareholder activists take aim at Boards

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    Contributor: Jim Rossman

    16 May 2024

    Barclays Investment Banking Shareholder Advisory Group’s Q1 2024 Review of Shareholder Activism reveals a noticeable shift in both the pace of and demands made in activism campaigns as the year begins. Explore all four key trends.

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    Contributor: Jim Rossman

    16 May 2024

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    Shareholder activists take aim at Boards

    To receive a copy of the full report, Q1 2024 Review of Shareholder Activism, please email: ShareholderAdvisoryGlobal@barclays.com

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    Shareholder activists launched 63 campaigns in the first three months of the year, down 19% year over year but are still tracking above the trailing four-year average.

    Record pace for shareholder activism

    However, while activity was down YTD, universal proxy and legal developments are disrupting the landscape.

    Here are four key trends that have emerged so far this year:

    1. The slowdown came in Europe, while activity held steady elsewhere

    European companies were the target of 11 campaigns in the first quarter, down 52% from the 23 campaigns launched in the first three months of 2023.

    Elsewhere, the number of campaigns held steady. In the US, they totaled 29 in the first quarter versus 30 during the same period last year. The Asia-Pacific region saw 20 campaigns compared to 17 last year.

    Also of note, the 10 busiest activists accounted for 33% of campaigns, down from 46% in the first quarter of 2023. Of note, first-time activists launched 29% of the campaigns, topping a multi-year average of 16%.

    Record pace for shareholder activism

    2. Activists are making surgical strikes on board seats

    The most common activist demand remains board change with 49% of campaigns targeting seats so far this year.

    Activists won 39 board seats in the first quarter, well below last year’s 51 seats. They demanded fewer seats, but they won nearly 80% of the seats they targeted – up from two-thirds historically.

    Also, their campaigns are moving more quickly with the advent of the universal proxy card. Time-to-settlement is now taking about 61 days compared to 86 days in 2022 as the revised format allows shareholders to mix and match board candidates.  

    M&A objectives
    M&A objectives
    M&A objectives

    3. M&A falls out of focus

    Merger and acquisition demands appeared in 29% of activist campaigns in the first quarter, down significantly from last year’s 49%.

    One likely explanation is that the M&A market overall is down substantially, but once M&A activity rebounds, M&A activism will likely follow. Another likely reason is a primary focus on capital return in the Asia-Pacific region, which was the focus of 45% of campaigns compared to 16% during the same period last year.

    When campaigns do include M&A demands, the sale of an entire company has been the most-popular push – a sign investors are anticipating interest-rate cuts.

    Activists continue forcing Board changes

    4. New legal issues disrupt activists

    Two Delaware court cases have disrupted long-held practices in establishing shareholder and settlement agreements. Some activists have had to adjust language in recent settlement agreements as a result. The State of Delaware is expected to introduce and enact amendments intended to address some of the uncertainty caused by these recent cases. If approved, the amendment will retroactively affect all agreements made prior to the date.

    On other legal fronts, companies and shareholders continue to litigate advanced notice deadline changes adopted in response to the universal proxy cards. And the US Securities and Exchange Commission’s long-awaited 13D/G rule amendments and climate change disclosure rules took effect.

    What to expect and questions for the rest of the year

    Campaigns will continue moving more quickly, and activists are likely to keep winning a higher percentage of the board seats they target. Given these trends, it will be instructive to see how companies and activists change their negotiation strategies in the year ahead.

    Other areas our Shareholder Advisory team will continue to monitor as 2024 unfolds include:

    • What may drive a rebound in European activist activity
    • Whether investors and companies reach accord on advanced notice bylaw adaptations in the UPC era
    • How interest rate movements may affect activist’s M&A demands

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