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Activists, including Jeff Smith's Starboard Value LP and Paul
Singer's Elliott Management and others who normally do not weigh
in on corporate affairs, asked for board seats at 212 companies
in 2016, according to data released on Wednesday by research
group Activist Insight.
That marks a 14 percent increase in the number of companies
targeted from 2015, when investors asked for seats at 186
corporations. In 2014 they targeted 154 companies, up from 113
in 2013, the data shows.
"There are more activists involved and more companies are being
targeted," said Eleazer Klein, a partner who co-chairs law firm
Schulte Roth & Zabel's Shareholder Activism Group. "And the
trend toward settlements has continued, in part because
companies recognize the credibility of activists," he added.
Whether they push for management changes, spin-offs or share buy
backs, corporate agitators are finding that captains of industry
are more often ready to see their point of view.
Last year 63 percent of requests for board seats ended in a
settlement, up from 54 percent in 2015. Only 31 percent of the
situations developed into full-blown proxy contests, down from
39 percent in 2015 and 42 percent in 2014.
Last year Starboard settled with Yahoo for board seats, William
Ackman's Pershing Square negotiated seats at Chipotle and Paul
Hilal's Mantle Ridge appears to be making inroads to give Hunter
Harrison a chance to run railroad CSX.
By settling, investors and companies save money and the
distraction a proxy fight can cause. Those are both key
considerations as activists show improved returns with the HFRI
Activist Index up 10.4 percent in 2016 after a more modest 1.15
percent return in 2015.
Investors often come away with fewer board seats than they might
have before. The data show investors won 215 board seats in
2016, down from 221 in 2015. The average board seat gained
through a settled proxy contest shrunk to 1.4 last year, down
from two seats in 2015.
If a full blown proxy contest occurs, the data show they are now
more likely to lose. Last year management won 12 times, compared
with eight wins for investors.
Shareholders sided with iRobot against hedge fund Red Mountain
and securities firm FBR & Co beat back a challenge from Voce
Capital Management.
(Reporting by Svea Herbst-Bayliss; Editing by Tom Brown)
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