Regulatory reforms and a range of other factors will trigger increased shareholder activism over the next 12 months, according to the second edition of Shareholder Activism Insight published by Schulte Roth & Zabel in association with mergermarket.
Based on a series of interviews with corporate executives and activist investors, the study examines the core issues affecting shareholder activism in the current market and provides a forecast for shareholder activism in the year ahead.
The majority of both corporate (64 per cent) and activist (60 per cent) respondents expect to see an increase in shareholder activism in the upcoming 12 months. This marks a significant change in corporate respondents’ sentiment from the 2008 edition of the report, in which only 40 per cent of corporate respondents predicted an increase for the following 12-month period.
“These survey results indicate a new wave of activist investing in the next 12 months for a variety of reasons,” says David E. Rosewater, Schulte Roth & Zabel business transactions partner and co-head of the activist investing practice.
However, respondents are sometimes starkly divided as to the specific drivers of activism during this period. While 68 per cent of activist respondents say excessive cash on companies’ balance sheets will be a key driver of activism over the next 12 months, only 15 per cent of corporate respondents agree.
Instead, more than half of corporate respondents (54 per cent) identify financial performance as the key catalyst during this period. Additionally, more than three-quarters of activist respondents (76 per cent), but only 40 per cent of corporate respondents, expect activist investors to become increasingly involved in companies’ proposed M&A transactions over the next 12 months.
Survey findings also suggest that “say on pay” rules and the elimination of broker discretionary voting will have an affect on shareholder activism in the future. Looking specifically at the Dodd-Frank Act, however, corporate respondents say Dodd-Frank will not cause them to change their approach to executive pay structures, board composition or public relations.
