Shareholder activism and engagement

September 2023  |  ROUNDTABLE | BOARDROOM INTELLIGENCE

Financier Worldwide Magazine

September 2023 Issue

Evidenced by the number of campaigns that have emerged over the last 12 months, shareholder activism is back and more present than before the pandemic buffeted the markets. Recent campaigns have seen activists engage with the tech sector as a means of achieving cost reductions or margin improvements while others have focused on environmental, social and governance (ESG) issues as a tool for driving change. More evolved and sophisticated than before, shareholder activism can at times prove unpredictable in both origin and tactics. This puts the onus on companies to stay alert.

FW: Reflecting on the last 12 months or so, what key trends would you say have dominated shareholder activism activity?

Ulmer: Activist shareholders are back and more present than before the coronavirus (COVID-19) pandemic hit the markets. This is evidenced by the sheer number of campaigns that have emerged over the last 12 months, more evolved and sophisticated than before. Compared to what we have seen in the past, the clout and the persistency of activists has increased. At Bayer, Elliott has been pursuing a split of the company for years now. This year, together with other activists, it succeeded in replacing the chief executive and a split into an agricultural and a pharmaceutical group is on the table again. At Brenntag, Primestone has not only blocked a merger with Univar, together with other activists it is now pushing for the separation of Brenntag’s two business divisions. This long-term approach and its persistency are striking.

Warrick: Historically, a key component of the activist playbook has been advocating that target companies seek a strategic transaction. Despite a slowdown in global M&A activity, M&A has remained a core component of the activist’s playbook. However, a growing number of M&A-related campaigns have targeted breakup or divestiture transactions. Furthermore, activists focused more attention on company capital allocation policies, scrutinising companies’ use of resources and urging companies to take action to return capital to shareholders. While traditional activists such as Starboard, Elliott and Carl Icahn continue to be active participants in the activism ecosystem, the universe of potential activists continues to diversify as new activist funds, led by experienced activism practitioners who previously worked at established shops, commence campaigns targeting companies. We have also seen an uptick in activist-style attacks from individual shareholders, first-time or occasional activists, and former and current directors and members of management.

Swedenburg: After a pretty busy 2022, activist activity has softened a bit over the last 6 to 12 months, at least with respect to US targets. This softening is likely in part driven by the slower M&A market, which has resulted in some activist campaigns shifting to other, non M&A-based, themes, such as capital allocation and operational efficiency. Last year, much attention was given to the introduction of the universal proxy rules, with many wondering whether it would lead to a surge in activist campaigns. While we have not seen such a flood of contested proxy fights, we have seen an increase in the proportion of contests leading to settlements. Two other trends that seem to be on the rise are increasing signs that activists are less wed to prosecuting their campaigns shortly before the onset of proxy season, and modestly more ‘swarming’ in large cap situations, whereby multiple activists pursue one or more strategies targeted at a single large cap issuer.

Katz: Over the last 12 months, we have seen the big activist firms grow stronger, while many of the small activist firms have closed up shop. With higher interest rates it becomes more expensive to run an activism campaign that relies on leverage. Elliott Management, Trian, Starboard, Icahn, Third Point and Engaged Capital continue to grow and prosper. One of the key trends we have seen develop over the last 12 months is that the larger activism firms have formed private equity arms that have engaged in transactions with both activist targets as well as potential activist targets. We have also continued to see effective ‘short’ campaigns, including one at an Icahn portfolio company. By and large, activist campaigns are more complicated today and generally have a longer investment horizon, requiring the activist to remain committed to its investment over a period of years as opposed to months.

Glover: Activism levels have been relatively high in 2022 and early 2023, roughly equivalent to the levels seen before the pandemic. M&A-related issues continue to receive significant attention, even though the dealmaking environment has become less friendly. In their M&A campaigns, activists seek to earn a return on their investment in a target company through the sale of a target company or the target company’s spin off of a business division. Alternatively, they seek to disrupt previously announced deals, taking the position that the deal should be repriced or terminated. A large number of activist campaigns during this period have focused on the target company’s operational problems, taking the position, for example, that a company’s strategic plans are flawed, that its costs are bloated or that the management team should be replaced. Environmental, social and governance (ESG)-focused activist campaigns are growing in number, but they have also triggered meaningful pushback by anti-ESG forces. Activists continue to play the governance card in a high percentage of campaigns, coupling other arguments with the position that the board is over-tenured or that governance is otherwise flawed.

FW: What issues are likely to drive activist campaigns in the current market? To what extent do shareholder-friendly laws facilitate activism and make campaigns more likely to succeed?

Warrick: Many speculated that the US Securities and Exchange Commission’s (SEC’s) new universal proxy rules, which require that all board nominees, both the company’s and an activist shareholder’s, be included on each of the respective proxy cards in a contested election, would substantially impact the activism landscape. Though the jury is still out on the overall impact of the universal proxy rules, early results indicate that there will be enhanced scrutiny by investors and proxy advisers on board nominees’ profiles, capabilities and past performance as a director or executive. Furthermore, fewer proxy contests went to a shareholder vote, which, coupled with an increasing number of activist disputes being resolved through settlement, suggests that the universal proxy rules may have led companies and activists to prioritise negotiated outcomes over the uncertainty of contested elections.

Swedenburg: With a quieter market for M&A, we will continue to see more activism targeting both balance sheet optimisation and operational efficiency. For example, activists have mounted campaigns against a number of US technology companies over the past year that, at least in part, took aim at what the activists believed were areas ripe for cost reductions or margin improvements. We also expect to continue to see ESG issues drive some campaigns, although the anti-ESG movement may dampen some of the activist enthusiasm on this front. Developments such as these tend to be driven primarily by market forces, although shareholder-friendly legal and policy developments – such as universal proxy card rules – often play some role as well.

Katz: Recent activist campaigns have focused less on capital allocation and return, although that is often a talking point. There is far greater focus on pushing for M&A activity, sometimes focused on the entire company or a significant business within the company that the activist feels is not fully valued by the marketplace. There has also been a push for spin offs or other corporate separation transactions to ensure that the market is fully valuing the ‘sum of the parts’. ESG issues are often a tool used by shareholder activists and there are some new activists that focus entirely on ESG issues in their campaigns. I do not believe that some of the more recent regulatory or legislative changes, such as universal proxy, perceived as ‘shareholder friendly’ have really changed the likelihood that an activist campaign will be successful.

Glover: Activists will continue to look for target companies that have significant vulnerabilities that they can exploit to generate value. One area of vulnerability relates to operational issues or flaws in strategic plans that cause a company to underperform its peers. A second, closely related area of vulnerability relates to M&A and spin off opportunities. Can the activist support an argument that the company should sell or spin off poorly performing business divisions, or that the entire business should be sold? A third area of vulnerability relates to capital allocation. Does the company’s capital structure offer opportunities for recapitalisations or restructuring? Is the company under-levered? Could it put cash in stockholders’ pockets through stock repurchases or dividends? A fourth area of vulnerability relates to management, succession plans and governance. Is the management team and board perceived as being ineffective? Is a well-developed succession plan in place? Does the board include directors who have served well beyond the average tenure for directors at peer companies? A fifth and newly emerging area of vulnerability that may draw activist attention relates to environmental and social issues. If an activist can argue that the company should be taking more meaningful steps to delay climate change or ensure sustainability, its campaign may gain traction with the growing number of socially focused investors.

Ulmer: Many recent campaigns aimed at splitting groups, arguing that the respective businesses being run separately would be significantly more valuable than as part of a group. While at Bayer and Brenntag activists have not reached their goal so far, at Fresenius it was decided to deconsolidate listed subsidiary Fresenius Medical Care, a first step toward full separation. On the other hand, campaigns run by impact investors have not continued to the degree that could have been expected following the situations at VW, RWE and BMW. It would not come as a surprise though were impact investors to team up with other activists in cases where a split also furthers their interests. Minority-friendly systems like German company law provide activists with the tools for their campaigns: from granting information rights or the right to trigger certain processes, up to the possibility to block significant measures. In some situations, even holders of a single share are granted a wide range of protective rights that can be used to create a nuisance in support of an activist’s campaign.

FW: What insights can you provide into the various approaches activists are taking to exert their influence and effect change? To what extent have tactics and methods evolved in recent years?

Swedenburg: Broadly speaking, the activist playbook has not changed materially over the past few years. When we zoom out, activists with a point of view on a company continue to be focused on accumulating a position in the target company – directly, through derivatives or both – and then letting their views be known to the target. The one shift we have noticed recently is the trend toward some activists approaching companies earlier and not necessarily in connection with the proxy season.

Katz: There is now an expectation that most activists will engage quietly with a target company long before any campaign becomes public and that is evidenced in part by the first time the market learns of an activist approach is when the activist and the target company enter into some type of settlement or cooperation agreement. Institutional investors, who activists need support from, want activists to engage quietly if that can be an effective strategy, recognising that the disruption that results from a public campaign can often negatively impact shareholder returns, particularly over the short term. Boards of directors that engage proactively with an activist can often minimise the disruption that would result from a public fight.

Ulmer: Activists want to get the ‘biggest bang for their buck’. As a result, they look for ways to leverage their often small stake in the campaign’s target. This started with the elaborate use of the media to generate backing from other shareholders and was followed by campaigns that deliberately included elements resonating with institutional investors. In the past, these investors would remain passive, but now they increasingly support campaigns, in whole or in part, in cases where their interests are aligned with the goals of the activist, be it good governance, a change of strategic direction or on environmental issues. For institutional investors, such support can be an easy way to show they follow through on respective commitments made to the market. In Germany, the latest twist is activists seeking support from proxy advisers. As many professional investors follow their guidance, bringing on board a proxy adviser creates tremendous leverage for an activist’s campaign.

Glover: Activists continue to use a wide range of tactics. Some funds prefer to negotiate behind the scenes unless and until they conclude the company is not being sufficiently responsive. Others go public early, distributing white papers and using social media to maximise pressure on the board and management. Much of the activists’ leverage comes from the threat that they will launch a proxy campaign and seek to replace management’s board candidates. That does not mean that the activists will launch a contest in every case. In fact, there have been somewhat fewer proxy contests so far in 2023 than in 2022, perhaps, in part, because both companies and activists have been more willing to negotiate settlements. When activists do launch a proxy contest, they are proposing much stronger candidates than was the case in the past.

Warrick: Activists, both traditional and nontraditional, are implementing various strategies to advance their agendas. Some approaches include leveraging the media as a means of adding pressure and adopting novel consumer marketing strategies. In addition, and likely facilitated by the new universal proxy rule, activists are increasingly attacking individual directors and nominating director candidates with strong records and reputations. Also, increasingly, activists are opting to take a more constructive approach when engaging with companies. In many instances, activists are prioritising private engagement, seeking to settle their demands through a negotiated agreement before the activist surfaces publicly. In certain instances, companies have implemented actions privately proposed by an activist without a formal agreement, and such actions are often supported by a public statement from the activist. These continuing trends indicate that both companies and activists are placing increased value on avoiding time-consuming, distracting and costly public contests.

FW: Have any recent shareholder activist campaigns caught your eye? What lessons can we draw from the way they were conducted, as well as their outcome, such as board-level personnel changes or strategy shifts?

Glover: Disney’s recent battle with Nelson Peltz and his Trian Fund is a prime example of the proposition that no company, no matter how big and no matter how powerful its brand, is immune from activist attack. It also demonstrates that a target can successfully defend against an activist campaign by responding aggressively to the activist’s concerns. Peltz launched his campaign when Bob Chapek was still Disney’s chief executive, arguing, among other things, that the company should address its money-losing streaming business, restore profit growth and reinstate a regular dividend. Peltz sought a seat on the board so that he could help the company achieve these goals. Shortly after Peltz launched his effort, the board replaced Chapek with Robert Iger. Iger then announced a significant cost-cutting programme and a plan to improve the streaming business. He further indicated that the company hoped to restore the dividend by the end of 2023. Peltz ended his effort to seek a board seat, and both sides were able to claim victory.

Warrick: The situation at Salesforce is certainly interesting. The campaign illustrates the recent activist ‘swarming’ trend, where a number of activists take stakes in a company and agitate for change, and it highlights the importance of boards and management teams ensuring that they are laser focused on taking action that is in the best interests of all shareholders at all times. Executing the company’s plan is key, but it is also important for the board and management to identify when changes must be made to the plan to better align interests. The difficulty in finding alignment with shareholder expectations is that there may be divergent views on what should be prioritised. A negotiated resolution with one activist will not necessarily protect you from new or continued attacks from other investors. This places an even greater emphasis on the true stewards of the company to make, execute and, when necessary, adopt a strategic plan that they believe is in the best interests of all shareholders.

Ulmer: A noteworthy recent campaign is Primestone’s engagement at Brenntag. When the chemical solutions provider engaged in takeover discussions with US competitor Univar, activist shareholder Primestone argued that the deal would destroy value and requested that Brenntag instead implement a share repurchase programme while refocusing on its core business. As a result, the deal was called off. Joined by Engine Capital, Primestone then began pushing for the separation of the company’s two business divisions. Their attempt to get representatives elected to Brenntag’s supervisory board was supported by proxy advisers ISS and Glass Lewis. It only failed by a narrow margin. As a consequence, the Brenntag management is now considering a review of strategic alternatives for the company’s business. This is another example of persistency and leveraging by activists.

Katz: Politan Capital Management’s campaign at Masimo was an activist situation that drew a lot of attention, primarily focused on the aggressive defensive tactics Masimo employed initially. Ultimately, Politan was able to get both of its nominees elected to the Masimo board, receiving support from both ISS and Glass Lewis, the two most influential proxy advisory firms. Another interesting campaign was last summer’s fight at Aerojet Rocketdyne where incumbent management prevailed in a proxy contest launched by the chairman following a transaction with Lockheed Martin that was blocked by the Federal Trade Commission (FTC). After the successful proxy contest defence, Aerojet Rocketdyne was able to pursue a more successful transaction with L3Harrris Technologies. Increasingly, institutional investors are willing to back whichever side in the proxy contest makes the most compelling argument for shareholder value creation and is less willing to support overly aggressive tactics by either side.

Swedenburg: The recent campaigns against Salesforce and Disney were noteworthy for a host of reasons. Both situations involved brand-name activist ‘swarming’ at mega-cap companies, which is somewhat unusual. In the case of Salesforce, each of Elliot, Third Point, ValueAct and Starboard were all making noise, and in the case of Disney, it recently faced off against each of Third Point and Trian. These campaigns also evinced some of the other 2023 trends we have seen – namely that both companies have taken steps to settle the campaign without a full-blown proxy fight and both campaigns had some key themes that were outside of the M&A sphere. Fighting activists can be highly distracting for boards and management, and seeking to assuage activists’ concerns quickly when it makes sense to do so shows that productive engagement is possible and can be done expeditiously, even at larger companies.

FW: How are these trends impacting on the personal risks facing D&Os? In your opinion, what pre-emptive steps should D&Os take to manage the risks that threaten them personally?

Warrick: Activists routinely target changes in management-level personnel as part of their campaigns. They often assert that a target business’ failure to maximise its performance is a clear marker that current management, often the chief executive, is ineffective. An activist’s appointment to a company’s board increases the likelihood that a change in management will occur within the two-year period after such an appointment. Though pushing for management change may not always be a key highlight of a public campaign, it is often a major topic of discussion in private engagement between companies and activists. For management teams, the best defence to activism is a good offence. Ensuring that the company has a clearly articulated and investor-supported plan, and is executing on that plan, is the best path for companies to protect themselves from activist attacks. Furthermore, activists are increasing their focus on the quality of individual directors. Trends show that boards that lack diversity of skills, experience and perspective are vulnerable to activist attacks. In anticipation of these challenges, companies should regularly review their board’s composition and directors’ skill sets and assess the board’s refreshment process. Additionally, companies should clearly articulate their rationale and strategy for board refreshment and composition to the investor community. Particular attention should be paid to directors who are long tenured or lack relevant skills or expertise. Boards should also focus on key areas of experience and perspective where the board is lacking and act to proactively identify potential candidates to fill identified gaps.

Ulmer: Over the years, activists have become bolder, sometimes even aggressive, but they are also gaining market acceptability. Short sellers are seen as contributing to market transparency, as evidenced by the Wirecard situation. Other campaigns are pushing for widely acceptable ESG goals. Finally, suing management for breach of fiduciary duties is a more common and accepted practice these days than it used to be in the past. As a result, an activist threatening to sue members of management often suffices to ensure more serious consideration of a proposal, rather than it being outright rejected. Members of management might feel inclined to reach a ‘compromise’ to avoid a lawsuit. Management’s best protection in this context is to seek advice before such situations arise. Further, seeking buy-in by the full board and avoiding the ‘lonesome leader’ position, allows for standing strong, which is often enough to avoid a lawsuit. In the end, few threats are followed through by activists. They have no interest in spending money on lengthy lawsuits with an often unpredictable outcome. Instead they use the power of the threat.

Katz: There has been no increased personal liability to directors and officers (D&Os) because of activism. However, there is a greater concern about reputational risks resulting from a proxy contest as they have tended to be more ‘personal’ in recent years. Both management and the board need to be prepared to have their reputations challenged. Activists, in turn, have become smarter in targeting reputational issues, including by dredging up old social media posts that might appear inappropriate in today’s business world, even though at the time the original comments were made, they would not have stood out as particularly troublesome. Activist targets need to understand where they could be vulnerable to reputational issues in order to avoid these types of attacks. Due to the new universal proxy rules, activists now focus their attacks on particular directors instead of the entire slate and this has been an effective strategy.

Swedenburg: Being a director or officer at a public company is an increasingly demanding job. Today, D&Os need to be extremely engaged in terms of the development and execution of the company’s strategic plan and understanding the competitive dynamics and risks that the company faces. Ensuring that the company is attuned to its strategy, including the embedded risks and opportunities, and to its shareholder base, remain key to what will hopefully be overseeing company success while managing risks appropriately. Activist campaigns, which arise with frequency these days, should not come as a huge surprise to the diligent director or officer; they should know their perceived weaknesses and be armed with a robust defence of their actions.

Glover: One of the more significant risks that D&Os face in activist campaigns is that they will lose their positions, because a successful activist campaign may result in the replacement of some of the incumbent directors or the management team. Even if they are not replaced, D&Os face reputational risk if they become the subject of attacks by the activist and unfavourable reports in the media. In addition, they face litigation risk. The activist and other stockholders may file lawsuits seeking access to company books and records, including communications between board members and the management team. They may also file suits alleging that the D&Os breached their fiduciary obligations to the company, or that they aided and abetted disclosure failures. Managing reputational and replacement risk can be challenging. D&Os need to mount an effective defence that persuades stockholders that the activist’s complaints are misguided, and that the board and management team are acting in the stockholders’ best interests.

FW: What can companies do to proactively monitor the market, identify red flags and anticipate the onset of an activist campaign? How important is it to regularly engage with stakeholders?

Glover: Companies can do a number of things to monitor and manage the risk of an activist campaign. Perhaps most important, companies can think about what questions an activist might ask and develop persuasive answers. Does the company have excess cash on its balance sheet? Is it a potential acquisition candidate? Are there business units that should be sold or spun off? Is the business strategy flawed? Is the board over-tenured? Identifying potential weaknesses, developing plans to address these weaknesses, or explaining why they are not really weaknesses, can be an extraordinarily valuable exercise. Ongoing stockholder engagement is also quite important. The company can gain insights into investor concerns that might create a favourable environment for activism and also build relationships with investors that can be very useful if the company is challenged. When the stockholders believe that the board and management are listening to them and addressing their concerns, they are more likely to support the company in a contest with an activist. Other actions companies can take include hiring a stock watch service that will help identify unusual stock trading patterns and alert the company to possible activist activity.

Katz: Companies must aggressively monitor their shareholder base and recognise when there is a potential accumulation by an activist by regularly reviewing trading activity. In addition, companies can monitor their own websites to find out what shareholders are accessing particular parts of their websites that would be more focused on by a potential activist. Regular reporting by the investor relations team to the board of directors can better inform directors of key issues focused on by the company’s investors. Regular shareholder engagement, or at least attempts at engagement, are essential, particularly for larger firms. It is also important that potential activist targets attempt to open a dialogue with the index funds that can often act as the swing vote in a proxy contest. Smaller companies will find actual engagement to be more difficult as investors tend to focus on their largest holdings, but it is important to at least reach out on a regular basis. These types of relationships can provide an early warning signal if an activist reaches out to an investor who then shares information about the contact with the company.

Swedenburg: It is hard to overstate the importance of regular shareholder engagement. It has become a year-round effort. By being proactive with important shareholders and other stakeholders, companies not only gain a better understanding of what animates their decision making and drives any concerns they may have, but they also gain credibility with them, which is extremely valuable in the event the company ends up facing an activist campaign. For example, activist accusations of being ‘asleep at the wheel’ ring much hollower when a company takes the time to meaningfully engage with shareholders on a regular and sustained basis.

Ulmer: By now, most companies have set up early warning structures, ranging from detailed defence manuals to screening relevant social media for rumours and related discussions. Most important though, is an ongoing dialogue with major shareholders and transparent discussion of corporate strategy. Based on the most recent developments, understanding the voting practices of institutional investors becomes more important. Often, such investors do not have enough resources to cover all their investments with dedicated research and analysis. As a result, they rely on guidance by proxy advisers when voting their shares. This could easily lead to about 30 percent of the votes in a shareholders’ meeting being lost, should the activists convince the proxy advisers to support their campaign, as happened in the Brenntag situation. Providing such institutional investors with regular updates on corporate strategy is key.

Warrick: Regular engagement with stakeholders is crucial and serves a dual purpose. First, it serves as an early warning system to detect potential issues being raised by shareholders, analysts and other market participants. Second, it potentially fosters connectivity and trust between the company and its stakeholders, allowing the investor community to be heard and to believe that their concerns are being taken seriously. It is important for companies to develop and execute a robust shareholder outreach plan that entails regular engagement with the company’s shareholder base, as well as to monitor investor forums to be better in touch with investor sentiment. If a company’s initial outreach to investors occurs after an activist has surfaced, it is likely too late.

FW: What issues do you predict will shape shareholder activism through 2023 and beyond? What steps should companies take to prepare and respond?

Katz: ESG issues, such as responses to climate change and human capital issues, will be an increasing focus by activists, particularly for companies that do not appear to take these issues seriously. I also think that many activists will continue to focus on ‘operational activism’ which can be the most difficult type of activism given its longer investment horizon. Particularly if the activist can identify new directors or new management team members, activists pushing for operational improvements are likely to be more successful. Activists targeting smaller companies may be able to attract better candidates than the target company. All public companies need to ‘up their game’ on shareholder engagement and make sure that investor and public relations strategies are coordinated and effective. Directors of public companies hate to be surprised and it is essential that management regularly briefs their board on the company’s strategies and alternatives to those strategies so that the individual directors have a good feel for the approaches an activist investor could potentially take. It is essential that management and the board members maintain a coordinated strategy to prevent an activist from successfully driving a wedge between them.

Swedenburg: A rebound in the M&A market likely will drive increased shareholder activism, as M&A provides activists with a campaign theme they are used to prosecuting effectively. In a stronger M&A environment, we will see activists push for more business unit sales through portfolio rationalisation, as well as whole company sales. We continue to expect to see settlements take place at a fairly high rate, particularly with the increased ease with which activists can focus on particular directors using universal proxy cards. In addition, 2024 is a presidential election year in the US, which we think could lead to more heated rhetoric in the ESG versus anti-ESG debate and is therefore something on which companies should keep a close eye.

Ulmer: Based on what we have seen so far, I would not expect impact activists to play the role that could have been expected following last year’s campaigns. Probably the mixed reputation of groups like Extinction Rebellion starts to dilute impact investors’ clout. Nevertheless, transformation into more sustainable and environmental-friendly business models will play an important role in shareholder activism. However, economic goals, rather than a good cause, might lead the way of such campaigns. In any case, splitting up groups to release hidden value will continue to be top of the list. Like in the past, running a good business, transparent communication and close contacts with major shareholders as well as understanding the voting practices of institutional investors is key for successfully navigating a company through waters stirred by activists.

Warrick: Activism has developed to be an accepted item for investors to keep in their tool belt, making activist attacks more unpredictable in both origin and tactics. While there is always potential for novel theses and market-driven activist attacks, the key focuses will continue to be performance and good stewardship or, from an activist perspective, a lack thereof. Uncertain economic markets, continuing threats of recession and the looming US election will place a huge demand on companies and boards to present a coherent executable plan, take the right steps to execute on that plan and deliver results. In the face of potential activism, preparedness remains key. Boards should review their company’s short- and long-term strategic plans and proactively address potential soft spots. Communication is essential. Boards should regularly engage with and monitor their shareholder base to remain informed about investor sentiments and share updates on the company’s strategic plan. Furthermore, boards should take a serious, constructive look at the makeup of the boardroom, to ensure that the collective board has the right balance of skills, expertise and perspectives to make decisions that are in the best interests of their company’s shareholders.

Glover: In the near term, activists will continue to target companies that are underperforming relative to their peers – because they have lower margins, a weak management team, a poorly developed strategy or some other problem – and press for change that will lead to improvements in the stock price. They will also continue to look for companies with excess cash or that can be recapitalised. In addition, they will comb the ranks of de-special purpose acquisition companies (SPACs), many of which are now struggling. M&A-focused activity is likely to become even more prominent once the markets become more hospitable to dealmaking. ESG-focused campaigns will continue to have a high profile, but anti-ESG forces are likely to push back. An ESG activist that is unable to develop a strong economic thesis may find it difficult to gain traction with the stockholder base.

Michael J. Ulmer’s practice focuses on domestic and international private and public M&A transactions, joint ventures, general corporate advice and private equity transactions. His work extends to a broad range of industries and clients, including leading German corporates, Mittelstand companies, and domestic and international financial and strategic investors. He has vast experience in assisting clients from the Middle East with outbound investments. Mr Ulmer joined Cleary as a partner in 2016. He can be contacted on +49 (69) 9710 3180 or by email: mulmer@cgsh.com.

Stephen I. Glover is a partner in the Washington, DC office of Gibson, Dunn & Crutcher and recent co-chair of the firm’s global mergers and acquisitions practice. Mr Glover has an extensive practice representing public and private companies in complex mergers and acquisitions, joint ventures, equity and debt offerings and corporate governance matters. His clients include large public corporations, emerging growth companies and middle market companies in a wide range of industries. He can be contacted on +1 (202) 955 8593 or by email: siglover@gibsondunn.com.

Eric M. Swedenburg is head of the firm’s M&A practice and a member of the executive committee. He represents companies in a wide range of mergers, acquisitions and divestitures, spin offs, joint ventures and other significant corporate transactions. He also regularly counsels clients on shareholder activism, corporate governance and general corporate and securities law matters. He also advises non-public corporations, private equity firms and financial advisers in both US domestic and cross-border M&A transactions. He can be contacted on +1 (212) 455 2225 or by email: eswedenburg@stblaw.com.

Demetrius A. Warrick is a partner who regularly advises public and private clients on a variety of corporate matters, including strategic acquisitions, divestitures, auctions, strategic investments, reorganisations, financial adviser engagements and joint ventures. He has also represented many companies with respect to shareholder activism, takeover preparedness, unsolicited proposals, contested proxy solicitations and other contests for corporate control. In addition, he has advised clients in designing and implementing shareholder rights plans and other corporate protective measures. He can be contacted on +1 (212) 735 3235 or by email: demetrius.warrick@skadden.com.

David A. Katz is a partner at Wachtell, Lipton, Rosen & Katz in New York City, an adjunct professor at New York University School of Law and co-chair of the board of advisers of the NYU Law Institute for Corporate Governance and Finance. Mr Katz is a corporate attorney focusing on mergers and acquisitions, corporate governance, shareholder activism and complex securities transactions. He can be contacted on +1 (212) 403 1309or by email: dakatz@wlrk.com.

© Financier Worldwide

THE PANELLISTS

Michael J. Ulmer

Cleary Gottlieb Steen & Hamilton LLP

Stephen I. Glover

Gibson, Dunn & Crutcher LLP

Eric M. Swedenburg

Simpson Thacher & Bartlett LLP

Demetrius A. Warrick

Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

David A. Katz

Wachtell, Lipton, Rosen & Katz