Activism is alive and well, and it’s not going away anytime soon. Aside from the tenacious determination of activists like Bill Ackman or Carl Icahn, apparently demand for activist strategies is growing, and institutional investors in particular are supporting them.
More appetite for activism
FTI Consulting and Activist Insight worked together to conduct a survey of 24 activist firms and discovered that overall appetite for activism is on the rise. The firms surveyed have been involved in 1,200 campaigns in more than 10 countries all over the globe. They learned that already more than 300 companies were targeted by activists this year, compared to fewer that150 companies just five years ago.
It appears as if mergers and acquisitions will continue to be a favorite strategy of activists. Also activist investors now have billions and billions of dollars with which to target public companies.
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Activist Insight believes one of the reasons the number of activism campaigns has ballooned so dramatically in only five years is because of the rapidly increasing amount of funds activists have at their disposal. Activists expect the growth trend to continue, with only 4% suggesting that they expect funding for activism will decline.
Activists seeing to work together with companies
With more money comes the ability for activism campaigns to target companies with larger and larger market capitalizations. The survey indicated that the number of board seats activists have been seeking at companies with market caps of more than $10 billion in recent years has nearly doubled.
Unsurprisingly, the more money investors sink into activist funds, the more activists are encouraged to seek even more capital. Most funds with a main or partial focus on activism are planning t raise more capital within the next year or so:
Institutional investors are in activists' corner
As Wall Street becomes more and more comfortable with activism, institutional investors and pension funds are starting to align themselves with activists. In some cases, institutions are even partnering with activist investors in their campaigns, according to FTI and Activist Insight.
"Recent examples of institutions and activists working together include Relational and CalSTRS in Timken," pointed out Steven Balet, Managing Director and activism specialist in the Strategic Communications segment at FTI Consulting. "However, the real activity is the kind of behind-the-scenes collaboration as seen with ValueAct and two large mutual fund institutions in the Microsoft situation. We anticipate that this type of cooperation will only grow in prevalence."
Activists far prefer to partner with institutional investors or pension funds rather than other activists. Institutions and funds make important partners for activists because they will vote their big stakes in favor of the activist. Interestingly, FTI and Activist Insight discovered that it seems some institutional investors are tipping off activists to stocks they think could be helped.
Activism moves to Canada, Europe
While activism largely started in the U.S., many activist firms are starting to see the U.S. market as being too crowded, so they're looking overseas for more targets, especially in Canada and Europe.
Activist Insight and FTI found that activism in Canada and Europe appears to have declined since 2012, but their survey results indicate that this trend could reverse next year. They also report that more than half of the funds they surveyed named the U.K. and Canada as the areas where they were considering launching future campaigns. Other countries that were popular include Australia, the Netherlands, Denmark, France and Switzerland.
Graphics in this article are courtesy FTI Consulting and Activist Insight.