Interview, Fireside Chat
Activism Activity on the Rise
- Shareholder activism volume has reached an all-time high, matching the recovery pace of M&A and financing markets to levels unseen since 2015.
- Current activity remains robust despite significant volatility in the broader equity market.
- Over two-thirds of U.S. activism activity this year stems from "non-dedicated" or occasional activists, rather than traditional specialized funds.
- Engine No. 1's proxy fight against ExxonMobil is cited as the most prominent example of a first-time activist campaign.
- Activists are leveraging a record-high M&A market to pressure companies into evaluating portfolios for divestitures and structural simplification.
- The market is experiencing a "super bloom" of corporate separations, a trend expected to persist as investors demand streamlined structures.
- Existing capital pools, including index funds and pension funds holding 25–30% of large-cap client equity, are becoming increasingly vocal on ESG issues.
- BlackRock has explicitly characterized climate risk as investment risk, signaling a shift in major capital holder sentiment.
- A new generation of millennial and Gen Y investors is reshaping capital allocation by prioritizing asset managers with defined social and sustainability agendas.
- ESG governance has long been a component of activism, but activists are now pivoting to make environmental and sustainability themes the central pillar of new campaigns.
- Activist criticisms regarding ESG are predicted to become more frequent, central to arguments, and increasingly aggressive.
- Target selection for ESG campaigns relies on relative peer-group performance rather than absolute metrics, aiming to identify companies in the lower quartile or decile.
- Clients are advised to integrate ESG directly into corporate strategy, capital allocation, and board decision-making rather than treating it as a disclosure exercise.
- Executive and board compensation practices must be explicitly aligned with stated ESG strategies to mitigate activist targeting.
- Socially responsible practices are increasingly viewed as critical for recruiting and retaining younger talent, translating corporate citizenship into human capital advantages.
- Companies utilizing green bonds or sustainability-linked financing are securing capital on more attractive terms, potentially lowering the overall cost of capital.
- The proliferation of occasional activists necessitates that companies maintain agility and enhanced preparation to anticipate potential attacks.
- Large-cap companies must continuously monitor the spread between their "sum of the parts" valuation and current market valuation to determine if gaps represent secular or cyclical trends.
- Retail investors are no longer reliable default supporters of management, citing volatility seen in cases like GameStop and AMC as a potential risk vector for activists.
- Activists may attempt to co-opt retail investor momentum to gain leverage in proxy contests.
- The strong M&A environment includes a rise in private takeaways (e.g., Medline), prompting public companies to re-evaluate whether remaining public or pursuing delisting is optimal.
- Portfolio review is now critical for determining if the entire company or specific business units should be divested or privatized.