Led by investors such as Carl Icahn, Bill Ackman and Jeff Smith, and targeting companies from DuPont to PepsiCo, campaigns by activist investors have become a common occurrence in the United States in the past few decades.
Now, an increasingly crowded American market is pushing activists to look beyond the US’s borders.
As a result, corporate boards and management teams all over the world would do well to prepare for their arrival. This is the advice of a panel of experts who gathered in Washington DC to discuss the issue in late September at the Global Board Leaders’ Summit of the National Association of Corporate Directors (NACD).
“Activism in the US dwarfs activism in the rest of the world,” says Keith Gottfried, partner and shareholder activism defense practice leader for law firm Morgan Lewis & Bockius. “Nevertheless, it is increasingly becoming a worldwide phenomenon.”
Gottfried offered figures by Activist Insight, which publishes information on shareholder activism, that show the exponential growth of activist campaigns. In Australia the number of companies targeted went from two in 2011 to 33 in 2014, while in Asia it jumped from four to 19.
Europe started from a higher base of 34 targeted companies in 2011, then peaked at 60 a year later and has since hovered between 40 and 50 a year. According to Daniel Burch, chairman, CEO and co-founder of consulting firm MacKenzie Partners, this is only the beginning. “Eventually, we are going to run out of what activist investors call undervalued opportunities here in the US,” he says. “Europe is the next frontier, but Asia is not far behind.”
Within three years, Burch predicts activist campaigns will be split 50/50 between the United States and the rest of the world, up from approximately 70 to 30 today.
Against this backdrop, veteran director Margaret Pederson, president and CEO of the NACD Connecticut chapter, recommends that boards all across the world move immediately to take preemptive action. “I’m a big proponent of boards acting as ‘self-activists,’ doing an activism audit to figure out what they could do to avoid being targeted or how to respond if they are,” she said.