NEW YORK: An introduction to Corporate/M&A: Shareholder Activism

New York: An Introduction to Corporate/M&A: Shareholder Activism

Shareholder Activism Overview 

Every economy needs a mechanism to maintain a properly functioning “checks and balances” system for the governance of publicly traded companies. Shareholder activism has established itself as a highly effective and often necessary counterbalance to corporate boards that are not acting in the best interests of shareholders. History has shown that boards of underperforming companies tend to preserve the status quo while shirking accountability to shareholders. Since shareholder activism emerged as its own asset class more than a decade ago, activist investors have identified and filled this accountability gap worldwide.

Olshan Frome Wolosky’s Shareholder Activism Practice 

Olshan’s Shareholder Activism Practice Group is widely recognized as a premier practice worldwide for activist investor campaigns. We have unparalleled experience, both domestically and internationally, in all areas of shareholder activism and corporate governance, and routinely counsel clients on a wide variety of activist strategies, from letter-writing campaigns and behind-the-scenes engagements with management and boards to more aggressive proxy contests, consent solicitations, withhold campaigns and unsolicited takeover bids. We also advise investors on activist-driven M&A and private equity activity, co-investments, governance issues, Schedule 13D and Section 16 filings, Forms 13F and N-PX and activist-related litigation.

Notably, over the past two decades our clients have orchestrated the replacement and appointment of more than 1,500 public company directors across the globe. We advise on over 100 activist campaigns each year, including many of the most closely followed, high-profile board contests.

Shareholder Activism as an Asset Class 

Shareholder activism as an investment strategy has emerged over the years as a distinct asset class. According to Bloomberg, $67 billion was invested by shareholder activists in 2024. According to Barclays, in 2024, activists launched 243 campaigns around the world – 47% in the U.S., 20% in Europe and 27% in the Asia-Pacific region – making 2024 the most active year since 2018. Investors continue to wage these campaigns at companies of all sizes and across all sectors such as those of prominent activists like Elliott Management, Starboard Value and Engaged Capital, at companies like Phillips 66, Autodesk and YETI Holdings, while others play out more discretely behind the scenes.

Types of Activist Campaigns 

Private engagements with boards commonly aim to resolve investor concerns without public escalation but often serve as preludes to more overt campaigns. If the company and investor fail to reach a resolution, a director election contest can ensue in which the investor challenges the incumbents for board representation at the company’s next annual meeting. This traditional proxy contest approach requires the activist to formally nominate a slate of directors in accordance with certain procedures and by a certain deadline and to comply with new federal “universal proxy card” rule notification requirements.

Types of Shareholder Activists 

Every year, we represent a wide range of different types of activists, from your garden-variety balance sheet activists to operational and corporate governance activists. M&A activists, including those who push companies to conduct a strategic review for an outright sale, block an ill-advised transaction or sweeten a deal, continue to feature prominently in the space. We also continue to hear from a number of traditionally passive investors. These “reluctavists” predominantly pursue deep value investments and historically held passive, long-term stakes with no intention of any active involvement. Recognizing the continued successful value creation in their portfolio companies by established, pure-play activists, these passive investors now exhibit a willingness to engage in an activist strategy to address operational, strategic or other concerns.

Developments and Trends in Shareholder Activism 

As the leading law firm in shareholder activism, we have first-hand insight into the current trends in the space and a deep understanding of how these trends will impact the activism landscape. In 2024-2025, these trends include the following:

Shareholder Activism Builds Momentum into 2025

Shareholder activism worldwide saw a robust 2024 as it unfolded against a backdrop of tumultuous market and geopolitical crosswinds. The momentum from 2024 quickly carried into the new year, with the number of campaigns at the largest companies increasing by 17% globally and 43% in the U.S. during Q1 2025 as compared to the same quarterly period in 2024, according to Barclays. Additionally, during Q1 2025, there were more settlements of activist campaigns at the largest companies and a 34% increase in the number of board seats won via proxy contests and settlements by activists compared to the same period in 2024, according to Barclays. 

Highly Impactful Campaigns in North America

Shareholder activists proved to be highly impactful in 2024 in terms of their ability to influence boards, especially in North America. The U.S. was the primary battleground for shareholder activism in 2024, as 60% of all activist campaigns targeted U.S.-based companies, up from 56% the previous year, according to FactSet.   

While Canada saw a modest 2024 proxy season in terms of the number of campaigns launched, it had the highest win rate at the largest companies across all jurisdictions, accounting for more than 50% of the board seats won globally, according to Barclays. This included complete board overhauls at Gildan and Dye & Durham by Olshan-advised activists, demonstrating just how effective activists can be in holding entire boards fully accountable to shareholders.

Japanese Companies on the Hotseat

Japan was the second-busiest market for activist investing in 2024, with the number of new campaigns increasing nearly 50% from the previous year, according to Bloomberg. Activism in Japan has been booming, with funds such as Strategic Capital, Dalton Investments and Oasis Management sifting through a plethora of companies that are still perceived as undervalued despite the Nikkei more than doubling since the onset of the pandemic through Q1 2025.   

Recalibration in Europe

Europe saw a sluggish 2024 proxy season as far as the number of companies taken to task by activists. This weakness in Europe carried into Q1 2025 among the largest companies, with fewer campaigns than any other first quarter since 2021, according to Barclays. The recent slowdown suggests an adjustment period, with signs pointing toward renewed activist activity in the region led by U.S.-based funds.

CEOs in the Crosshairs of Activists

CEO turnover due to activist pressure reached record levels in 2024, with departures at U.S. companies nearly tripling compared to previous years, according to Diligent. This trend converged with the increasing focus on operational and strategic activism during this same period. The highly publicised campaign launched by Ancora at U.S. Steel, which featured a call to replace the CEO, suggests this trend may continue.

Modernisation of Schedule 13D/G Reporting Regime

In February 2024, the hotly debated proposed revisions to the rules governing 5% ownership reporting under Section 13(d) and 13(g) of the Exchange Act went into effect. Shareholder activists were pleased with the SEC’s decision not to go “all-in” on its proposed overhaul of the reporting regime, likely based on input from a wide range of investors that the proposed rules would subvert shareholder democracy. At the end of the day, the new rules were less transformative and more balanced than initially proposed. Notably, the deadline for filing an initial Schedule 13D was shortened to five business days (from the legacy 10 calendar days) after crossing the 5% ownership threshold.

Troubling Developments in Company Defense Tactics

We continue to see a disturbing trend in the number of companies attempting to invalidate nomination letters for purported failures to comply with their nomination procedures. It has become ordinary course for companies, on advice of their counsel, to seek to invalidate shareholder nominations and disqualify dissident nominees for various hyper-technical deficiencies or “foot faults” that have nothing to do with the quality of the nominees. Meanwhile, director questionnaires that companies typically require dissident nominees to complete continue to grow in length and complexity. Shareholder activists have been fighting back by filing lawsuits against companies that have crossed the line with these tactics.

On this front, shareholder activists struck a monumental victory with the Delaware Supreme Court’s July 2024 ruling in Kellner v. AIM Immunotech Inc.Kellner struck down certain advance notice bylaws requiring extremely broad disclosures that the Court found were adopted for an improper purpose—namely, “to thwart [the] proxy contest and maintain control.” We expect activists to continue to challenge the enforceability of similarly worded “second-generation” bylaws.  

With the 2025 proxy season well underway, activists must stay attuned to ongoing geopolitical and international trade uncertainty, inflationary pressures and market volatility. As the markets react to the twists and turns of the new Administration’s policies, fresh opportunities for shareholder engagement will emerge, setting the stage for another robust year for shareholder activism in 2025.

Sources: Barclays data is derived from Barclays Shareholder Advisory Group – 2024 Review of Shareholder Activism or Barclays Shareholder Advisory Group – Q1 2025 Review of Shareholder Activism, as applicable, for campaigns at companies with market caps greater than USD500 million as determined by Barclays. Bloomberg data is derived from Bloomberg Global Activism League Tables FY 2024. Diligent data is derived from Diligent Market Intelligence: Shareholder Activism Annual Review 2025.