DealLawyers.com Blog

This Sullivan & Cromwell memo takes a look at 2020’s activist campaigns & settlement agreements. Contrary to initial expectations, market volatility resulting from the onset of the pandemic didn’t lead to higher levels of activism. Instead, activist campaigns declined by nearly 1/3rd through the first eight months of 2020.  But down doesn’t mean out – and as this excerpt points out, 2020 saw some new approaches by activists that may have important implications in 2021 & beyond:

As the pandemic depressed M&A activity and created an increased focus on liquidity in the spring and early summer, activism campaigns with M&A and capital allocation theses decreased, with activists increasingly focusing on board and management changes and operational improvements instead. In addition, we began to see more examples of activists mentioning  environmental, social and political (ESP) themes in their campaigns, after years of speculation that this trend would emerge as activists fight to win over institutional shareholders.

The strategies deployed by activists are also changing, including through an increased focus on short strategies, highlighted by Hindenburg’s campaign at electric truck maker Nikola.  We are also continuing to see a blurring of the lines between activists and other investors, as activists increasingly adopt private equity and special purpose acquisition company (SPAC) strategies and private equity funds and other investors foray into activism.

With the improved economic outlook after vaccinations have been sufficiently rolled-out & the potential pent-up demand resulting from the decline in activity last year, the 2021 proxy season could be a robust one for new activist campaigns.

– John Jenkins