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Biggest Drivers of Shareholder Activism in 2018

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As some successful funds have advertised the returns available to activists, new players are emerging on the scene. There were a total of 544 activists tracked by ActivistMonitor as of December 2017, and roughly two-thirds of them have conducted just a single campaign.

In order to find out how shareholder activism will impact 2018 dealmaking, Toppan Vintage, in partnership with Activistmonitor and Mergermarket, is pleased to present the newest edition of the M&A Pulse newsletter.

Toppan Vintage question: What will be the biggest drivers of shareholder activism over the coming 12 months? Leading deal experts weigh in...

In the year ahead, 60% of our respondents think one of the top two drivers of more activism will be expansion into the
activity by new funds.

One way in which new activists are joining the fray is by buying stakes with more experienced investors. Such was the case with Avenue Capital Group, which kicked off just its second activist campaign in 2017, combining with BlueMountain Capital Management and Paul Singer’s Elliott International to call for changes at US$2.1bn oil and gas drilling contractor Ocean Rig.

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A majority of our survey respondents also said they believe an increase in the number of companies vulnerable to activism – due to factors such as sector distress and poor individual performance – will motivate more investments. This result could be tied to the growing belief that the current recordsetting bull market is vulnerable to a crash. Many investors predict that anything from a series of cybersecurity incidents to a collapse in China could lower valuations and expose weak companies, which could in turn open the door to activists.

“Shareholders will target distressed companies in the coming 12 months, as their investments need to be productive and the companies will need to gain value,” said the co-chief investment officer at a Toronto-based hedge fund. “Shareholders won’t depend on the boards of companies to make decisions but will rather try and take matters into their own hands.”

A significant minority of our respondents also think new targeting of small- and mid-cap companies will drive activism. There may a limit to the potential of this trend, however. Out of 751 activist campaigns open in the Americas and EMEA as of December 2017, just 203 were at companies with market capitalization of US$250m or less, according
to ActivistMonitor.

Part of the reason for this may be that activist campaigns can be extremely costly to run, as the head of Vinson & Elkins’ shareholder activism response team, Kai Liekefett, told Bloomberg in October. This means the potential returns must be worth the expense of the fight.


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Shareholder Activism in 2018

 
 

Last year saw shareholder activists super-sizing their bets and seeking new targets in foreign markets. This growth has prompted companies to become more strategic in dealing with activist demands, though investors are also viewed as better suited to combat opposition against their campaigns. With experts saying that sector distress and poor individual performance will leave many companies vulnerable to activist campaigns in the year ahead, many questions lie ahead for both sides.

   

Toppan Vintage

Toppan Vintage is a leading international financial printing, communications and technology company dedicated to delivering a hassle-free experience with the highest quality accuracy, reliability and value for your organization’s financial printing and communications needs.

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