Corporate Governance

Corporate Governance and Exec Compensation 2021

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Shearman & Sterling LLP 19 | Recent Shareholder Activism Trends The convergence of activists and private equity is the outcome of multiple factors: the intense competition for positive returns, both investment classes sharing similar sensibilities for undervalued companies (including a willingness to drive certain operational, financial and strategic efficiencies) and the record amounts of capital raised but undeployed on hand. While we expect some continued cooperation between activists and private equity, restrictions in private equity limited partnership agreements on hostile transactions and proxy fights and negative associations with activist activities may subdue cooperation on activist campaigns. POISON PILLS SURGED IN 2020 BUT NORMALIZED IN 2021 Market volatility in the early days of the COVID-19 pandemic provided activists with an opportunity to take advantage of the unprecedented drop in stock prices in March, which led to a significant uptick in the adoption of anti-takeover rights plans. About three times as many rights plans (79) were adopted in 2020 by companies listed in the United States compared to historical numbers (22 in 2018 and 23 in 2019), with 60% being adopted during March, April and May. As the markets normalized in the second half of 2020 and the risks related to opportunistic acquisitions and activist strategies declined, the rate of adoptions slowed and fell in line with prior years. 5 We expect the rate of rights plan adoptions to be consistent with historical (pre-COVID) low levels in the second half of 2021. 1 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 4 17 20 10 3 4 2 4 4 4 6 5 Source: Deal Point Data.

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