RC: How would you describe shareholder activism over last 12-18 months? What key trends have emerged? Could you comment on any recent cases of note?

Crozier: Shareholder activism has become more sophisticated in strategy, tactics and targets, as well as becoming an almost commonplace event. An activist was recently quoted as saying that five years ago he was a pariah, now he’s an asset class. One of the major catalysts has been the significant amount of capital activists have raised recently, due in large part to the significant outperformance by activist funds compared to hedge funds as a whole. Activist funds currently have approximately $100bn in AUM, up from approximately $36bn in 2009, permitting them to take on more campaigns – approximately 82 in 2013, compared to 26 in 2009 – and at larger targets, such as Apple, Microsoft and Proctor & Gamble, to name just a few. It remains the case, however, that most activist campaigns are directed at companies with market caps under $2bn. It has now become common for activists funds to hire investment banks to prepare sophisticated presentations, recruit and pay high quality director nominees, resort to litigation and wage extensive, expensive public campaigns in support of their agenda. They have also become adept at building significant positions without the company’s knowledge by using various synthetic positions. As M&A has started to come back, we have seen activists use many of the strategies and tactics honed in conventional activism in that arena as well, either to secure additional consideration, or in some cases to block the deal entirely. The leading example is the campaign last year by Carl Icahn and Southeastern Asset Management to block the going private transaction at Dell led by Michael Dell and Silver Lake Partners in favour of various alternative proposals. Ultimately, shareholders approved the going private transaction after two price increases. M&A activism also took an interesting turn recently when Pershing Square emerged as a co-bidder with Valeant Pharmaceuticals in their unsolicited proposal to acquire Allergan. 

Jul-Sep 2014 Issue

Innisfree M&A Incorporated

McDermott Will & Emery LLP

RLM Finsbury

Skadden, Arps, Slate, Meagher & Flom LLP