November 18, 2021

M&A Activism: Assessing the State of Play

As I blogged last month, M&A activism is on the rise, with 45% of all activist campaigns in 2021 featuring an M&A-related thesis, above the multi-year average of 39%.  This recent report from Insightia, Morrow Sodali and Vinson & Elkins takes an in-depth look at the state of play in M&A activism.  It addresses both current conditions and potential changes  that may unfold in the coming months in the U.S and abroad.  This excerpt discusses activists’ recent focus on pushing for a higher price in pending deals, rather than seeking a sale or opposing a particular deal outright:

With some notable exceptions, the most prominent M&A activism over the past year has been reactive. Six years of boards being told to “be your own activist,” has ensured that breakups and strategic alternatives rarely go unreviewed – especially now benign financial conditions have boosted CEO confidence. That is just as well, since hardly any deal these days does not face some shareholder arguing for a bump, a block, or a review of how it has been structured.

The trend may be partly circumstantial – a buoyant M&A market with volatile stock prices creates plenty of opportunities. “Some deals didn’t look as good as when they were struck, and activists have tried to take advantage,” says Bill Anderson, head of raid defense at investment bank Evercore. In addition, take-privates involving cash-rich private equity firms and the potential for rival bidders to jump into deals have also emboldened activists to argue for an increased premium in return for their support, he says.

Unlike two years ago, when a wave of activism hit acquiring companies amid fears of strategic overreach, the current wave of activism mostly aims to improve terms for selling shareholders, rather than block deals outright.

The report also notes that in the U.S., deal opposition is a strategy that requires “high confidence or strong emotion,” since U.S. law doesn’t provide minority shareholders with a lot of legal advantages. Perhaps that’s why many of those involved in oppositional activism are “occasional activists, reacting to events in stocks they already held, or arbitrageurs.”

John Jenkins