This Skadden memo reviews current trends in shareholder activism, including the growth in M&A activism, the merging of private equity & activism, and the rise of global activism. We’ve covered these topics in prior blogs, but one that I don’t think we’ve talked about is what the memo calls “reluctivism”:
Over the last few years, there has been a rise in so-called “reluctivists,” or traditionally long-only institutional investors who are engaging increasingly in activist campaigns. Recent examples, such as Wellington Management’s public opposition to Bristol-Myers Squibb’s acquisition of Celgene and Neuberger Berman’s nomination of directors to Verint’s board, display a willingness of traditional asset managers to engage in activist tactics with the goal of increasing the value of their investment.
The use of activist tactics has become a more accepted way to effect change as part of a broader transition to a shareholder-centric model of corporate governance. Under this model, there is no monopoly on good ideas, and any investor with a clear agenda, sufficient resources and the support of a wide shareholder base can “become an activist.” Thus, large institutional investors with significant ownership stakes in public companies are becoming more integral to the success of activist campaigns and companies’ responses to them.
Traditionally passive institutional shareholders are providing support to activist campaigns more frequently — generally behind the scenes, but sometimes in the open. In some cases, the shareholder-centric model has empowered institutional investors themselves to bring about change through tactics traditionally employed only by activists. The result has been the creation of an environment where even large, well-performing companies can become targets of activist campaigns launched by a variety of constituents.
– John Jenkins