According to Lazard, which tracks activist campaigns globally, the first quarter of 2022 saw 73 new activist campaigns launched, marking the busiest three-month period on record. While Wall Street accounted for most of those campaigns, European companies were also vulnerable to a record number of activist investor campaigns.
What is an activist campaign?
An activist campaign is a strategy in which an activist investor acquires shares in a company and uses them for an agenda, such as changing shareholder returns. An activist campaigner may also try to get the board and top management replaced by someone else.
Such investors are an increasing presence in today’s financial markets, and businesses are finding themselves under pressure from these campaigns to respond. So, how can organizations reduce the risks of being targeted and how should they optimize their IR strategy to respond to activists?
Engagement Analytics
A top engagement analytics tool can help organizations consolidate social media activity, earnings call transcripts, video recordings of presentations and news into one personalized space. It can also help companies appreciate the impact of their strategic stories on the market, identify new or targeted investors evaluating your story, build a more productive relationship with investors, and address activist sentiment promptly through the best IR activist analytics technology.
With activist analytics tools, companies can use artificial intelligence and machine learning to decipher patterns, identify activist investors on digital properties, and speed up management preparation before surveillance reports or 13-F filings.
Understand Activist Strategies
While the pandemic has resulted in changes in the field of activism throughout different sectors, there are some commonalities. Learning some common activist strategies can help you deal with potential disruptions.
New Strategies
Activists are looking for innovative ways to propel their agenda:
- Attacking a company with a full proxy fight.
- Attempting an exempt solicitation.
- Initiating a vote-no campaign.
- Launching a shareholder proposal to push for a company sale.
The strategies are bold and risky. That’s why it’s important to understand the strategies and tactics that could impact your company.
Random Targeting
Significant shifts in strategy are creating new opportunities for activists to target companies. Activists and their hostile tactics are a fact of life for many companies today. Equinix’s Director of IR, Chip Newcom, says adopting transparency and giving reasonable rationale for any strategy changes can deter activists from targeting your company.
Advanced Hedge-fund Trading Tactics
Activists have used a number of strategies over the years, but some are pairing with private equities. Some enter agreements with a broker to buy shares via a swap arrangement in order to pursue their agendas.
Going Beyond Strategies and Technology
While having the right analytics and technology is important, having a day-one activist response plan that your team is well-versed in and aligned with is still essential. Develop a response strategy to be prepared for the expected and unexpected shareholder activism. Your legal, proxy, and advisors should be a phone call away as part of your response team.
After detecting a threat, leverage your strategy as you brief your board and assign the right response to teams to engage with the activist and their tactics.
