“Withhold” campaigns in which in lieu of launching a proxy contest, an activist publicly urges shareholders to withhold votes from a director or to vote no on a particular proposal are becoming increasingly popular. This recent Cooley blog discusses this strategy and its implications for corporate boards:
The year’s stealth disruptor is the low-cost “vote no” campaign. As Cooley partner Bill Roegge explained, “Instead of an activist running a competing slate, … they just go out and publicly say ‘don’t support the company’s directors.’” For companies with director resignation policies (i.e., policies stating that if a director receives less than a majority vote at an annual meeting, that director will tender their resignation to the board), significant withhold tallies can force resignations – or create public relations (PR) and governance crises if boards decline resignations from affected directors, often laying the groundwork for subsequent campaigns by the activist.
– 2025 examples: While Harley-Davidson (activist: H Partners) narrowly avoided failed elections amid a full-throated PR battle, its CEO (who was a target of the campaign) later stepped down from the role. Forward Air (activist: Ancora) saw one director fail and two barely clear a majority, with all three ultimately resigning. At WEX (activist: Impactive Capital), a single press release drove razor-thin margins for several incumbents.
– Why they work: As Collected Strategies’ Jim Golden put it, withhold campaigns drive “a true PR narrative campaign,” cheaper than a slate and potent when activists have lined up sympathetic institutions. Even activist losses can be costly for issuers. “While [the activist] didn’t win,” Golden noted of Harley-Davidson, “the CEO ended up having to resign because of the vote results.”
The blog also points out that withhold campaigns also illustrate that “activism season” is a dated concept, because these campaigns “extend the threat beyond nomination windows and keep the pressure on boards to engage early.
This Wachtell memo discusses ten trends in shareholder activism to keep an eye on for the upcoming year. Here’s what the memo has to say about M&A-focused activism:
M&A remains a persistent theme of activism. The returns from operational improvements are generally less attractive to activists than the prospect of an immediate transaction premium. Over the last few years, however, a challenging regulatory and macroeconomic environment limited activists’ ability to credibly push for full-company sales or strategic carve-outs. With the significant M&A rebound in 2025, we expect activists to increase their focus on event-driven M&A outcomes. While pushing for full-company sales will remain a key objective for many activist campaigns, we also expect to continue to see activists arguing for break-ups that purportedly shed underperforming divisions or capitalize on trading multiple arbitrage for different businesses.
The memo suggests that companies that want to consider potentially transformative M&A in a more deliberate fashion may consider establishing a strategic review committee that includes one or more activist-nominated directors. It stresses that while such a committee may make sense in particular situations, deciding whether to sell or break up the company should remain a full board decision, and the committee’s authority should be appropriately limited.
The September-October issue of the Deal Lawyers newsletter was just sent to the printer. It is also available online to members of DealLawyers.com who subscribe to the electronic format. This issue includes the following articles:
– Integrated Agreements: It’s Not Always About Conflicts
– Biotech Spin-Off Transactions
– New State Notification Requirements for Mergers and Acquisitions
– Advance Notice Bylaws: Delaware Court of Chancery Gives Dissidents Another Bite at the Apple
– Renewal Season is Here! Is It Time to Renew Your Membership?
The Deal Lawyers newsletter is always timely & topical – and something you can’t afford to be without to keep up with the rapid-fire developments in the world of M&A. If you don’t subscribe to Deal Lawyers, please email us at info@ccrcorp.com or call us at 800-737-1271.
In late September, I shared the results of a Spencer Stuart survey of public and private company directors about shareholder activism. That study included a data point — that 44% of public company directors would consider joining an activist slate — that surprised me. I thought that number would be lower due to concerns about “being on the other side of the table.” So I was interested to see the discussion under the heading “Normalization of Serving as a Dissident Nominee” in this Wachtell alert, which links this “normalization” to the trend of speedy settlements post-UPC.
The speed of settlements has also been facilitated by an increase in the quality of individuals willing to serve as dissident nominees, which can include sitting directors and former public company CEOs and CFOs (including those of the target itself). Many of these individuals are sourced through the same search firms used by companies in their own director refreshment process and some may have no prior relationships with the nominating activist.
Within this larger trend, however, we are seeing situations in which a potential dissident nominee has informed the activist that the nominee is willing to participate in a consensual settlement, but not in a publicly fought election contest. In these situations, the activist has extra incentive to reach a negotiated settlement.
While companies should scrutinize the qualifications and entanglements between activists and their nominees, if a company intends to settle, there are benefits to doing so before a fight becomes too acrimonious and relationships with prospective directors are harmed.
The alert also says you probably don’t want to hear that one of your sitting directors or officers has joined an activist slate at the same time as the rest of the world, even if at a totally unrelated company. It suggests:
One approach would be to revise director governance guidelines to require notice to the company, not just before a director or officer joining another board, but before a director or officer agreeing to be nominated as a candidate for another board.
If you’re involved in a SPAC IPO or de-SPAC transaction, take a look at this Woodruff Sawyer blog with a list of the top 5 insurance and risk questions SPAC teams should be asking. Here’s one that’s particularly timely:
Crypto-Treasury Strategies Are Popular Now. Are There More Risks or Costs If My SPAC or Operating Company Goes in That Direction?Yes, on both fronts.
Insurance implications: Carriers view crypto-related strategies in general and crypto-treasury strategies in particular as higher risk. Some won’t quote coverage for them at all, while others will require higher premiums or impose restrictive terms. If your SPAC or operating company is considering holding or investing in crypto assets or pursuing a target with the purpose of engaging in crypto-related activities, expect increased scrutiny from insurance underwriters and higher insurance premiums.
Litigation and regulatory risk: Crypto strategies carry elevated litigation and regulatory risk. Like any fast-moving trend, there are bound to be missteps in this developing area, especially as companies race to adopt new structures and strategies without fully understanding the regulatory framework or potential business risks around them. This can lead to shareholder suits, SEC investigations, and other costly legal challenges.
If you’re pursuing a crypto-treasury strategy, talk to your broker about increasing your coverage limits. Legal fees in these scenarios can escalate quickly, and a higher limit may be necessary to protect your directors and officers. You’ll also want to ensure that your policy includes coverage for regulatory investigations and defense costs. These new strategies are certainly interesting, innovative, and exciting, but they carry an increased level of risk. Make sure your insurance program reflects that reality.
It also discusses litigation risks for SPACs more generally, the status of premiums and picking the right coverage, both at the time of your SPAC IPO and de-SPAC.
This HLS blog penned by James Hu, J.T. Ho and Chase D. Kaniecki of Cleary Gottlieb points to “an emerging correlation of stockholder return and national security imperatives” and suggests that activist campaigns may start incorporating national security themes in the near future. The blog says companies should be proactive in both assessing their national security positioning and carefully communicating their strategy to protect shareholder value.
As with any activist situation, companies should consult with their advisors on whether and how to proactively communicate that they are consciously positioning their operations and developing contingency plans as new geopolitical patterns emerge in an effort to preserve shareholder value. Global companies must be particularly careful to communicate these messages in a balanced manner when operating in countries with competing national interests. Failure to do so could result in retaliatory actions, which could negatively affect a company’s operations, impair strategic transactions, and destroy shareholder value in the process.
It is also critical for companies to be aware of how their activities and relationships might be perceived by both governments and shareholders before undertaking them. Any appearance of activities and relationships which may be viewed as compromising national security interest could be catalyst for both government as well as activist activity, even if such activities and relationships are ultimately justified. Companies are advised to get ahead of such issues and undertake actions to control the narrative, before being compelled to undertake actions that they wouldn’t otherwise do.
Cornerstone Research just released a report on M&A litigation settlements in the Court of Chancery. It found that the number and dollar amount of settlements in M&A-related lawsuits filed in Delaware increased substantially from 2019 to 2024. Here’s more from the press release:
In 2024, 21 such settlements totaled $618.3 million in the aggregate, a significant increase from five settlements totaling $110.1 million in the aggregate in 2019.
The report also observed that of the 10 settlements within the study period that equaled or exceeded $100 million, four have occurred since 2022.
The most common settlement amounts during 2022–2024 ranged between $20 million and $50 million, while the most common settlement amounts in prior periods were below $10 million.
Large settlements contributed, but it says there has also been an increase in the number of smaller settlements.
In 2024, 21 such settlements totaled $618.3 million in the aggregate, a significant increase from five settlements totaling $110.1 million in the aggregate in 2019. The report also observed that of the 10 settlements within the study period that equaled or exceeded $100 million, four have occurred since 2022. The most common settlement amounts during 2022–2024 ranged between $20 million and $50 million, while the most common settlement amounts in prior periods were below $10 million.
A “typical” settlement in the study was one involving “a dispersed group of stockholders alleging unfair consideration paid for their shares due to alleged actions by a controller.”
In 78% of settlements, the plaintiffs were stockholders of the target company in the M&A transaction.
74% of settlements included allegations involving actions by the controlling stockholder.
There’s a lot more data in the full report, and the D&O Diary blog has a longer summary.
Seyfarth Shaw recently published the 11th edition of its “Middle Market M&A SurveyBook,” which analyzes key contractual terms for over 150 middle market (i.e., purchase price of less than $1 billion) private target acquisition agreements signed in 2024 and the first half of 2025. As in recent years, it presents data for deals that included R&W insurance separately from deals where no R&W insurance was utilized. Here’s a discussion on the prevalence of fraud exceptions to the indemnity provisions:
– Of the non-insured deals that included a fraud exception, approximately 69% of such deals defined the term “fraud,” as compared to approximately 67% in 2023/2024.
– Of the insured deals that included a fraud exception, approximately 99% of such deals defined the term “fraud,” as compared to approximately 96% in 2023/2024.
It then provides a few examples of fraud definitions based on the agreements reviewed for the Survey, ordered from most to least seller protective.
– “Fraud” means, with respect to a Party, an actual and intentional fraud in respect of the making of any representation or warranty set forth in Article 5 or Article 6, as applicable, with intent to deceive the other Party, or to induce that Party to enter into this Agreement and requires (a) a false representation of material fact made in Article 5 or Article 6, as applicable, (b) any of the Knowledge Parties had actual knowledge that such representation was false when such representation was made, (c) an intention to induce the Party to whom such representation is made to act or refrain from acting in reliance upon it, (d) causing that Party, in justifiable reliance upon such false representation and with ignorance to the falsity of such representation, to take or refrain from taking action, and (e) causing such Party to suffer damage by reason of such reliance. For the avoidance of doubt, “Fraud” shall not include any claim for equitable fraud, promissory fraud, unfair dealings fraud, omission, any tort (including any claim for fraud) to the extent based on constructive knowledge, negligent or reckless misrepresentation, extra-contractual fraud, constructive fraud, and other fraud-based claims.
– “Fraud” means an actual and intentional misrepresentation of a material fact with respect to the making of the representations and warranties (and, for the avoidance of doubt, not constructive fraud, equitable fraud or negligent misrepresentation or omission) in this Agreement or the Ancillary Documents, that was relied upon by a Seller or Buyer Indemnitee, as applicable, to its detriment.
– “Fraud” means intentional (and not reckless) fraud within the meaning of Delaware common law.
– “Fraud” means common law fraud under Delaware law.
Check out the full survey for more info on “what’s market” when negotiating private target acquisition agreements.
– The reps and warranties insurance market is not growing at the rate seen in previous years. A notable development has been the consolidation of Themis into Ryan, with Ryan taking over Themis’s book of business and absorbing its underwriters. Mergers like this can influence competition, pricing, and capacity in the sector.
– The market continues to be highly competitive. We have stopped seeing quotes for less than 2% of the limit, but we rarely see a quote as high as 3%. The rate is still much lower than it was in 2022, when it averaged 5.1% in the first quarter.
– The RWI market is evolving to better serve smaller transactions that were traditionally overlooked due to high costs and extensive diligence requirements. Two underwriting markets are creating products and processes specifically for smaller deals. They offer standardized policies, simplified underwriting, and cost-effective coverage, making RWI accessible for deals under $50 million.
The report also notes that claim activity is on the rise, as often happens during economic downturns, and that’s been accompanied by increased dissatisfaction with how claims are being handled. The report suggests that part of the reason for the increasing dissatisfaction is insureds taking a shot at more speculative claims. The report says that this is leading to “an almost two-tier system” for RWI claims, in which some carriers are pushing back on legitimate claims based on small technicalities, while others continue to take a more accommodating approach.
In Peña v. MacArthur Group, (Del. Ch.; 10/25), the Chancery Court refused to dismiss claims that a corporation’s merger conversion into a limited liability company conferred a non-ratable benefit to the company’s insiders in the form of insulation from future liability for breaches of fiduciary duty.
The case originally arose as an appraisal action in connection with the MacArthur Group’s merger conversion into the LLC form, but discovery revealed that certain company officers had used company funds for personal reasons and caused it to into various questionable transactions. The plaintiff amended its complaint to raise direct claims for breach of fiduciary duty against those officers and the corporation’s directors and officers.
The plaintiff alleged that the defendants orchestrated the conversion into an LLC to eliminate potential derivative liability for past breaches of fiduciary duty and, because the LLC’s operating agreement eliminated fiduciary duties, to eliminate the potential for future fiduciary duty claims. The plaintiff contended that these actions conferred a non-ratable benefit on the defendants in the form of a reduction in their potential liability, and that the entire fairness standard of review should apply.
Vice Chancellor Zurn first determined that because the transaction resulting in the surviving entity being “merely the same corporate structure under a new name,” the reorganization exception to the general rule that a target shareholder loses standing to pursue a derivative claim applied to this transaction. Accordingly, she held that since the plaintiff could continue to pursue derivative claims post-closing, the aspect of the transaction did not result in a non-ratable benefit to the insiders.
She reached a different conclusion with respect to the elimination of potential future claims resulting from the conversion to LLC status. She noted that in Palkon v. Maffei, (Del.; 2/25), which challenged TripAdvisor’s reincorporation merger moving the company from Delaware to Nevada, the Delaware Supreme Court distinguished between situations involving “existing potential liability” for the fiduciaries and “future potential liability” for the fiduciaries. In that case, it concluded that any benefits from Nevada’s more lenient liability regime for corporate fiduciaries were purely prospective in nature, and did not result in a non-ratable benefit to the directors and controlling stockholder.
The Vice Chancellor went on to observe that the situation here was different, at least with respect to certain of the defendants:
Here, Mac LLC’s fiduciary duty waiver secured for the former MacArthur directors a waiver that is prospective. And Mac LLC’s fiduciary duty waiver eliminates “all future potential liability for all fiduciary duty claims, including claims for breach of the duty of loyalty.” The parties join issue on the maturity of the MacArthur directors’ litigation risk: whether fiduciary duties were waived on a clear day.
Per Maffei, in this context, the existence of a clear day turns on whether a complaint contains “allegations that the [transaction] decisions were made to avoid any existing threatened litigation or that they were made in contemplation of any particular transaction[.]” Well-pled allegations to that effect support a pleading stage inference that a reduction in mature litigation risk is sufficiently material to trigger entire fairness review. Allegations as to “unspecified corporate actions that may or may not occur in the future” do not suffice.
In this case, Vice Chancellor Zurn concluded that the plaintiff had adequately pled such allegations, at least as to the controlling shareholder and another director, and concluded that because they obtained a non-ratable benefit from the transaction, the entire fairness standard should apply to the allegations against them. However, because the plaintiff did not plead that the remaining directors received a non-ratable benefit or were otherwise conflicted or non-independent, the Vice Chancellor dismissed the plaintiff’s claims against them.