Also next week, we’ll be releasing our inaugural report on proxy fights, showcasing the combination of data that our merger with Proxy Insight and the rapid growth in our offerings allows us to provide.
Proxy Fights: A Minority Of Activist Campaigns
The data show why proxy fights – which we define as a contested campaign for board composition, whether or not it ends up at a vote – continue to be a minority of activist campaigns. Since 2014 just 12% of all U.S. companies targeted and 28% of board representation demands have ended up in one. Uncertainty about the outcome make them a risky strategy for both sides. Of the 147 fights that went to a vote since the beginning of 2014, 70 were won by management and activists won at least one seat at 77.
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This, plus growing tactical sophistication and moderation of demands, has meant that dedicated activists – those investors with a primary or partial focus on the strategy – went from running the majority of contested votes to a minority between 2014 and 2019. But occasional activists have generally stepped up in their place, with issuers less inclined to settle with players lacking a track record. And in any case, the proxy fight has a place even for specialist funds – witness Senator Investment Group’s innovative combination of a takeover approach and board campaign with Cannae Holdings at CoreLogic, or Hudson Executive Capital’s fight at USA Technologies. Indeed, it was only three years ago that Trian Partners spent millions of dollars to get Nelson Peltz on the board of Procter & Gamble, or Pershing Square Capital went the distance at ADP.
Along with contributions from Vinson & Elkins, Morrow Sodali, and Reevemark, our report highlights how increased shareholder engagement and corporate preparedness have impacted the proxy fight.
Getting the right nominees has become increasingly important to proxy voting advisers and institutional investors. According to Proxy Insight data, between November 2015 and July 2020, 83% of management nominees voted for at proxy contests were independent, whilst 81% of those who failed to be elected were non-independent. Meanwhile, 28% of female activist nominees in proxy contests that went to a vote were successful at securing a seat on the board, compared to 25% of male activist nominees, in a sign of the importance now attached to gender diversity.
And we also highlight the ripples that follow a proxy contest. The stocks of companies involved in a contested vote between 2014 and September 2020 declined on average within 90 days of a management victory but rose within that timeframe after an activist one, according to data from Activist Insight Online. On the other hand, companies where management won outperformed those where an activist did over 180- and 365-day periods. And according to Activist Insight Governance data, nearly as many companies that won proxy fights saw further board appointments or departures within 12 months of the contest as those where the activist gained at least one seat.
I hope that leaves you eagerly anticipating the release of our fourth special report of the year. We’ll have at least one more before the end of 2020, and look forward to bringing you our unique style of analysis into the new year.
Sessa And Cyrus Capital Participating In An Alternative Bailout Plan At Garrett Motion
Tough times bring out tough conversations and cash crunches have led to lots of activist activity in cash-strapped companies. This week, Sessa and sometime activist Cyrus Capital disclosed they were participating in a previously announced alternative bailout plan at bankrupt auto parts maker Garrett Motion put forward by Oaktree Capital Management, Centerbridge Partners, and Garrett’s former parent company Honeywell. Cygnus Capital called on Ashford Hospitality Trust to modify its stock exchange plan or seek a partner to shore up its finances instead of insisting on a scheme that has already proven unattractive to shareholders. And U.K. real-estate broker Countrywide inked a 90-million-pound investment from private equity firm Alchemy Partners in a bid to cut its debt load that activist investor Catalist Partners called "ill-judged." Expect the trend to pick up into as we head into 2021.
Quote Of The Week
Quote of the week comes from Senator Investment Group and Cannae Holdings, which released a presentation in support of their hostile bid for CoreLogic this week, and used as one of their main arguments evidence that shareholders expect a sale of the company:
"CoreLogic’s realized volatility has collapsed 67%, meaning that it no longer trades on fundamentals but rather as a deal stock anticipating a transaction."