A Look Ahead: Activism Campaigns to Follow in 2022
A Conversation Between Christopher P. Skroupa, Skytop Editor-in-Chief and Josh Black, Editor-in Chief, Insightia and Skytop Contributor / October 21st, 2021
Josh Black is the editor-in-chief of Insightia, a financial news and data company focused on shareholder activism, proxy voting, and corporate governance. In that role he leads a team of reporters and multimedia journalists. Based in New York City, Josh is a frequent speaker at industry conferences and an expert for the media. His weekly newsletter on developments in shareholder activism, as well as Insightia’s two monthly magazines and frequent special reports, are among the most widely read analyses of what is happening in these exciting areas of the investment world.
About Insightia: Financial news and data providers Activist Insight and Proxy Insight announced in October 2020 that they had merged to form Insightia, a leader in the field of public company information. Activist Insight was formed in 2012 and offers an extensive range of products including Activist Insight Online, Activist Insight Governance, Activist Insight Vulnerability, Activist Insight Shorts, Activist Insight Monthly magazine, and The Activist Insight Podcast. Proxy Insight has quickly become the world’s leading source of information on global shareholder voting, covering such hot topics as director and auditor elections, “say on pay” resolutions and environmental, social, and governance (ESG) proposals.
Christopher Skroupa: What is the trend for activism in 2022?
Josh Black: M&A activism, the subject of our latest special report, could be about to scale up in the new proxy season. Even without the legions of special purpose acquisition companies looking to do deals before their terminal dates, activists look set to unleash a wave of transactional campaigns.
Christopher: Can you highlight the latest campaigns, ones that you believe trend with M&A activism?
Josh: This week, at a prominent activism conference in New York City, guests talked about breakups, consolidation, and takeout opportunities; in the U.K., WM Morrisons and Blue Prism planned to move ahead with contested deals; in Canada, Canadian National Railway (CN) and TCI Fund Management traded blows in a proxy contest that started with an ill-advised attempt by CN to acquire U.S. peer Kansas City Southern; and in Japan, two more activists joined opposition to a tender offer for Nippo Corp. led by Japan Catalyst in its first public activist campaign. Carl Icahn, suffering the ignominy of Michael Dell lauding his ability to call the activist’s bluff during his 2013 leveraged buyout, launched another pre-emptive strike against a deal, this time in the utilities sector.
Christopher: Activism has gone global. Is this also the case for M&A activism ?
Josh: M&A activist trends are now discernibly international. Breakup activism, once a specialty of U.S. activism, is making headway among Europe’s conglomerates. The U.S. is seeing more opposition to deals than pro-M&A activism, a first. Private equity deals, an invitation for bumpitrage given competition in the industry’s well-funded ranks, are growing in the U.K. and Japan. Regulations, such as the Tokyo Stock Exchange’s new prime market corporate governance requirements, and scandals have led to restructurings that activists can exploit, as at Nippo and Toshiba, like those at South Korean chaebols Samsung and Hyundai a few years ago.
Christopher: Has M&A activism been sidelined during the pandemic, perhaps now ready for an uptick in 2022?
Josh: While much of the M&A activism since the start of the pandemic has been opportunistic or reactive – some seeking a small bump to put a shine on an otherwise necessary deal, others seeking more time for stocks to recover their former valuations before finding a deal – a new era appears to be dawning in which activists are seeking to make the weather and coming up against more resistant management teams. A more stable economic outlook and more uncertainty in the markets has activists looking not for an easy ride but opportunities to grab the reins.
Christopher: What are the drivers of successful M&A activism?
Josh: Whether they will succeed is usually harder to guess at the outset of a campaign than other types of activism. Although M&A situations are often fluid and their odds of passing shareholder approval can often improve with either good or bad economic news, volatility can also harden attitudes. Witness the votes against the merger of Five9 with Zoom Video Communications after Institutional Shareholder Services recommended against the deal – nearly three-to-one, thanks to the sliding value of Zoom’s stock.
Christopher: Have M&A activists added new tools to their strategic toolkit?
Josh: For issuers stuck in the middle of an M&A activist campaign, the good news is that activist tactics have not changed much. Although takeover bids from activists are much more credible these days and Senator Investment Group’s campaign at CoreLogic refined the model of a hostile bid putting a company in play, most campaigns are hand-to-hand combat on the merits or otherwise of a transaction. As several advisers told Insightia for this report, getting the proxy statement right guarantees the best possible start for a deal. Sadly, it doesn’t end the hard work.