Lazard's quarterly review of shareholder activism compiles and analyzes data on key activism trends globally.
Observations on the global activism environment in Q3 2020 include:
Activist activity remains muted
- Q3 2020 represented the lowest level of quarterly activist activity since 2013
- 24 campaigns were launched globally in Q3 2020, down 41% from Q2 2020 and 54% lower than Q3 2019 levels
- Q3 capital deployed dropped to seven-year lows (~$4.4bn), down over 60% sequentially and Y-o-Y
- 124 campaigns have been launched globally YTD, down 24% versus the prior year period
Slowdown is global and acute for large-cap targets
- Q3 U.S. campaigns were down 41% from Q2 and 64% versus Q3 2019; capital deployed decreased 39% from Q2 and 65% compared to Q3 2019
- Q3 European campaigns were consistent with Q2 but down 62% compared to Q3 2019; capital deployed increased by 2% from Q2, but decreased 63% versus Q3 2019
- Only eight campaigns in both Q2 and Q3, a fraction of the pre-COVID rate of Q1 (20 campaigns)
- 2020 YTD global campaigns against $10bn+ market cap companies decreased 17% Y-o-Y
Board seats in line with historical averages
- Despite fewer campaigns in 2020 YTD, activists are winning just as many Board seats as in prior years
- 100 Board seats won by activists this year, up slightly Y-o-Y
- Only 35 of the Board seats are from campaigns initiated in 2020
- Starboard and Elliott continue to be the most successful activists in terms of seats won, together accounting for over a third of Board seats won YTD
Return of M&A thesis amid banner quarter for dealmakers
- 50% of Q3 campaigns featured an M&A objective, recovering from ~34% in H1 2020 and consistent with 2019
- The return of M&A as an objective coincided with a resurgence of M&A in Q3 2020 after a quiet first half of the year
- Activist demands in 2020 YTD around strategy/operations (19%), governance (14%) and management change (7%) remain above multi-year averages
New developments in activism
- Private equity firms continue to use “activist-like” tactics at public companies, including New Mountain publishing a white paper on Virtusa and Senator partnering with Cannae to force M&A at CoreLogic
- Traditional activists continued to embrace the market’s strong appetite for SPACs; with Starboard Value’s SPAC raising $360mm after Pershing Square raised $4.0bn, a record for a SPAC
- Proposed changes to the HSR rules would effectively exempt activists from notification under this regulation and proposed modification to 13F reporting thresholds would eliminate holdings disclosure for small- and mid-cap activists
ESG Updates
- Amid increasing national dialogue regarding social justice, the NYC Comptroller pushed companies to publish data on their workforce’s diversity, and California passed a bill that would require companies based in the state to have underrepresented communities on their Boards
- The push for enhanced ESG disclosures continued, with the “Big 4” accounting firms and others releasing new guidelines and metrics on measuring sustainability issues