April 21, 2021

Activism: First Quarter Highlights

This Lazard report reviews shareholder activism during the first quarter of 2021. Here are some of the highlights:

– Q1 2021 saw a second consecutive quarter of elevated global activity (53 new campaigns initiated, in-line with Q1 2020 levels) following the pandemic related downturn of mid-2020

– The significant U.S. rebound continues, with 37 new campaigns (up 48% from Q1 2020 levels) accounting for 70% of all global activity. Q1 2021 U.S. activity is already approaching approximately 50% of U.S. activity for all of 2020. Even with many of Q1 2021’s live situations having recently settled, 66 Board seats remain “in play” heading into proxy season.

– In contrast to late 2020’s emphasis on mega-cap activity in the U.S., three-quarters of all Q1 2021 activity targeted sub-$10bn market cap companies, including Treehouse Foods (JANA), Kohl’s (Ancora, Legion et al.) and eHealth (Starboard and Sachem Head).

– Prominent activists Icahn, JANA and Starboard were among the quarter’s most prolific activists (launching 2 campaigns each), while perennially active Elliott launched only 1 new campaign (versus its average of approximately 4 campaigns launched per quarter since 2017)

– 47% of all activist campaigns in Q1 2021 have had an M&A thesis.  Attempts to scuttle or sweeten existing deals represented over half of all M&A-driven campaigns, versus 34% historically.

– U.S. ESG equity inflows have continued their torrid 2020 pace to start 2021, with approximately $17bn through February, setting 2021 on a path to far surpass 2020’s record inflows of approximately $62bn.  “Say-on-Climate” proposals from TCI Fund Management highlight diversifying activist tactics regarding ESG matters, especially in a proxy season where institutional investor votes on E&S proposals will be closely scrutinized.

European activism set records in 2020’s 4th quarter, but Lazard says that activity in Europe pulled back slightly, with only 10 new campaigns initiated during Q1. Institutional investors, occasional activists and new / small-cap activists led 9 of 10 new campaigns.

John Jenkins