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.
