Review of Shareholder Activism – H1 2020

Key observations from the first-half 2020 report include:

Year over year activity is down in spite of a busy end to H1

• 100 campaigns were launched in H1 2020, down 10% from the prior year period, as COVID-19 continued to mute pace of new activity

       - After April activity dipped to just 8 new campaigns, May and June saw an uptick to 16 and 17 new campaigns, respectively

• Capital deployed (~$25.8bn) in H1 relatively in line with 2019 levels, in spite of reduced campaign activity

       - Industrials, technology and financial companies alone accounted for three-quarters of all capital deployed

Global share of activity is increasing as US campaigns slow

• 42 U.S. campaigns in H1 represented a ~40% decline from prior year period, and U.S. activity dipped to 42% of global activism versus 59% in 2019

       - Decline was particularly acute for U.S. targets with market capitalizations greater than $10bn (only 3 new H1 campaigns relative to 15 in H1 2019)

• Europe’s share of global campaign activity rose to 28% in H1, supported by strong pre-COVID activity and an uptick in Germany

       - H1 European campaigns were initiated predominantly by institutional investors and occasional activists that took positions long before agitating

• 19 new campaigns in Japan already equals 2019’s record total, with activity driven by both U.S. fixtures (Elliott, ValueAct) and increasingly prolific regional players (Oasis, Asset Value Investors)

Board seats are in-line with prior year averages

• 86 Board seats won by activists in H1, up ~6% from the prior year period in spite of relatively lower campaign activity

       - Starboard and Elliott alone accounted for 29 Board seats, 34% of the H1 total

• Only 10 Board seats (12% of total) were won through a final proxy vote – 8 alone won by Starboard at GCP – reflecting pressure to settle pending disputes amid the COVID-19 pandemic

Activist focus is shifting amid COVID challenges

• Only 34% of H1 campaigns featured an M&A objective, down from ~47% in 2019, reflecting headwinds created by an uncertain M&A environment

      - ~30% of all H1 M&A campaign activity occurred in February alone, prior to the onset of COVID-related volatility

• The share of campaigns focused on Board change (34% of all H1 campaigns), operational improvements (20%) and management change (7%) outstripped multi-year average levels

Multiplying approaches to activism

• Private equity firms increasingly embracing public equity strategies and deploying activist-like tactics

      - KKR’s campaign for Board seats at Dave & Busters and Cerberus’ agitation at Commerzbank exemplify this new approach

• Traditional activists such a Pershing Square and Hudson Executive announced SPAC vehicle launches to take advantage of continued market dislocation
• ValueAct’s Jeff Ubben announced his retirement from the fund he founded; Ubben will launch Inclusive Capital Partners, which will push companies to tackle environmental and social issues

Proxy season and ESG engagement update

• Average say-on-pay support among S&P 500 issuers dipped below 90% (from 91% in 2018), with 9 failed proposals at S&P 500 companies
• 54 Russell 3000 Directors failed to receive majority support, up from only 33 in 2018
• Average support for environmental / social proposals ticked up to ~28% (from ~25% in 2018); 15 such proposals received majority support
• The “Big 3” investment stewardship teams each continued to stress COVID-era engagement priorities and announced senior-level personnel changes

Download the review to read the findings in full.