After decades of being treated as boorish gate-crashers, activist investors are infiltrating the boardrooms of large companies like never before. This year activists launched more campaigns in the U.S.—360 through Dec. 17—than any other year on record, according to FactSet. They secured corporate board seats in 127 of those campaigns, blowing past last year’s record of 107. Activists now manage more than $120 billion in investor capital, double what they had just three years ago, according to researcher HFR.
The industry has come a long way since the 1980s, when Carl Icahn, Saul Steinberg, T. Boone Pickens and other mavericks would amass large stakes in companies and demand a sale of the entire company. They were called “corporate raiders” and “greenmailers” and were widely criticized.
These days activists, while not exactly welcomed in corporate boardrooms, are rarely treated as ill-mannered outsiders. “These activist funds are just a different asset class who have the same pensions and endowments investing in them as other funds,” says Rob Kindler, head of mergers and acquisitions at Morgan Stanley. “The demonization of activists, when really what they are doing is providing returns to the same pension and endowment plans, just seems overdone.”
Several factors contributed to this shift, according to corporate executives, activists, bankers and lawyers. The financial crisis fanned dissatisfaction with corporate executives and brought low interest rates that helped activists thrive. Activists got more sophisticated about analyzing target companies and built alliances with other big shareholders, including mutual funds. And broad shifts in corporate governance gave more power to all shareholders, including activists.