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Lazard’s Quarterly Review of Shareholder Activism – Q3 2020

Oct 8 2020

Lazard's quarterly review of shareholder activism compiles and analyzes data on key activism trends globally.

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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

 

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