Activist Insight and Kingsdale Advisors launch the first report focusing specifically on M&A activism.

Drawing on the expertise of data provider Activist Insight, cross-border strategic advisory firm Kingsdale Advisors, activists, lawyers and investment bankers, the report provides a broad overview of the market and highlights groundbreaking campaigns, such as Carl Icahn at Dell, Pershing Square Capital Management at Allergan and Starboard Value at Staples and Office Depot.
The report also includes advice for boards which are preparing to announce a deal on how to weather shareholder activism, including ten practical steps and an interview with former Institutional Shareholder Services (ISS) executives Victor Li and Victor Guo, both now at Kingsdale Advisors.

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M&A emerges from the report as a favored tool for activists, with 47% of M&A activism since 2010 explicitly directed at pushing for the sale or acquisition of the target company.

Yet the data also highlight that volatile markets can increase the level of resistance to deals. Opposition to M&A rose 81% in North America from 2015 to 2016, as markets headed for a correction. Proxy Advisors have also begun playing a significant role in increasing deal resistance, with Institutional Shareholder Services more than doubling the rate of against recommendations on friendly negotiated deals between 2014 and 2016.

Concerns over deal pricing may have led the surge, with an increase in exits from activist positions led by both strategic and financial (including private equity) buyers. So-called “bumpitrage” appears to have been a profitable strategy for activists, with 18 of 68 mergers subjected to M&A activism seeing an increase in price between 2013 and Q1 2017, averaging an additional 21% consideration.

The number of large cap targets in North America rose from an average of 7.3 in the years 2011-2013 to 15 in the years 2014-2016. In each of Canada and the U.S.A., however, most targeted companies across the whole period were valued at less than (USD) $2 billion (71% for the U.S.A. and 78% for Canada).

Click here to view the report.

Quotes

“Activists come in all shapes and sizes but remain keenly interested in M&A,” said Activist Insight Editor-in-Chief Josh Black. “There is now a growing sophistication to the way they set out to make, break and amend deals.”

“A friendly deal can no longer be counted on as a ‘sure thing.’  Boards need to understand they will be held to a higher standard as activists watch,” said Joe Spedale, President of Kingsdale Advisors, U.S. “When you consider the time, money, and effort that goes into just getting to the announcement of a transaction, it makes sense to understand, consider, and prepare for the risk that an activist can quickly derail your deal.”

More information

For any questions about the data, or if you have a follow-up request, please contact Josh Black at [email protected]. Please note that bespoke data requests may take 24-48 hours depending on the amount of manual work required.

Data sheet

Companies publicly subjected to M&A activist demands per year

Company HQ 2010 2011 2012 2013 2014 2015 2016 Q1 2017
Canada 2 4 6 10 11 14 12 1
US 37 47 78 65 99 113 109 22
Grand Total 39 51 84 75 110 127 121 23

Market cap breakdown of companies publicly subjected to M&A activist demands per year

Canada 2010 2011 2012 2013 2014 2015 2016 Q1 2017
Large Cap 50% 0% 17% 22% 27% 7% 0% 0%
Mid Cap 0% 25% 17% 22% 18% 7% 8% 0%
Small Cap 0% 25% 50% 0% 0% 21% 58% 0%
Micro Cap 0% 25% 17% 33% 45% 21% 25% 100%
Nano Cap 50% 25% 0% 22% 9% 43% 8% 0%
Total 100% 100% 100% 100% 100% 100% 100% 100%
US 2010 2011 2012 2013 2014 2015 2016 Q1 2017
Large Cap 5% 9% 12% 9% 14% 12% 13% 5%
Mid Cap 16% 26% 22% 25% 16% 17% 15% 9%
Small Cap 32% 26% 28% 31% 31% 32% 33% 55%
Micro Cap 27% 19% 24% 20% 20% 24% 23% 9%
Nano Cap 19% 21% 14% 15% 18% 16% 17% 23%
Total 100% 100% 100% 100% 100% 100% 100% 100%

Key (All USD): Large (>$10bn), mid ($2-10bn), small ($250m-2bn), micro ($50-250m), nano (<$50m)

Breakdown of public M&A activist demands at North America-based companies

Action type 2010- Q1 2017
Push for sale/acquisition/merger 47.4%
Oppose sale/acquisition/merger 21.9%
Spinoff/sell business division 16.5%
Takeover 14.2%

Article by Activist Insight