Review of Shareholder Activism - Q3 2020

Observations on the global activism environment in Q3 2020 include:

Activist activity remains muted

• Q3 2020 represented the lowest level of quarterly activist activity since 2013

       - 24 campaigns were launched globally in Q3 2020, down 41% from Q2 2020 and 54% lower than Q3 2019 levels

• Q3 capital deployed dropped to seven-year lows (~$4.4bn), down over 60% sequentially and Y-o-Y
• 124 campaigns have been launched globally YTD, down 24% versus the prior year period

2020 YTD global campaigns against $10bn+ market cap companies decreased 17% Y-o-Y

Slowdown is global and acute for large-cap targets

• Q3 U.S. campaigns were down 41% from Q2 and 64% versus Q3 2019; capital deployed decreased 39% from Q2 and 65% compared to Q3 2019
• Q3 European campaigns were consistent with Q2 but down 62% compared to Q3 2019; capital deployed increased by 2% from Q2, but decreased 63% versus Q3 2019

 - Only eight campaigns in both Q2 and Q3, a fraction of the pre-COVID rate of Q1 (20 campaigns)

Board seats in line with historical averages

Return of M&A thesis amid banner quarter for dealmakers

• 50% of Q3 campaigns featured an M&A objective, recovering from ~34% in H1 2020 and consistent with 2019

       - The return of M&A as an objective coincided with a resurgence of M&A in Q3 2020 after a quiet first half of the year

• Activist demands in 2020 YTD around strategy/operations (19%), governance (14%) and management change (7%) remain above multi-year averages

New developments in activism

• Private equity firms continue to use “activist-like” tactics at public companies, including New Mountain publishing a white paper on Virtusa and Senator partnering with Cannae to force M&A at CoreLogic
• Traditional activists continued to embrace the market’s strong appetite for SPACs; with Starboard Value’s SPAC raising $360mm after Pershing Square raised $4.0bn, a record for a SPAC
• Proposed changes to the HSR rules would effectively exempt activists from notification under this regulation and proposed modification to 13F reporting thresholds would eliminate holdings disclosure for small- and mid-cap activists

ESG Updates

• Amid increasing national dialogue regarding social justice, the NYC Comptroller pushed companies to publish data on their workforce’s diversity, and California passed a bill that would require companies based in the state to have underrepresented communities on their Boards
• The push for enhanced ESG disclosures continued, with the “Big 4” accounting firms and others releasing new guidelines and metrics on measuring sustainability issues

Download the review to read the findings in full.