Activist funds have intensified their operations, after three years of decline, something that “will result in more transparency and better business practices,” according to information prepared by Lazard.
Lazard indicates that in 2022 these funds began 235 action campaigns, compared to 173 the previous year, 36% more. It is the first time since 2018 that this figure has risen.
He points out that activist funds are involved in the management of the companies in which they invest, taking part in Shareholders’ Meetings. “They actively participate in them and seek to improve the management of the company, issuing contrary votes when necessary. Their votes against the remuneration of executive leadership, for example, are especially relevant, although they do not reduce their activity to that”.
Likewise, it indicates that they constitute a factor to be taken into account by the management teams of the companies, since they often intervene in the assemblies in defense of their interests as owners and put “the finger on the sore spot in many aspects. They are even capable of proposing replacements at the top of the companies, as well as blocking operations or other significant actions”.
“Activist campaigns are, therefore, those that seek specific objectives in the company. They are almost always related to appointments or dismissals, whether from the board of directors or from the board of directors, and for this, the promoter funds are capable of bringing together political rights seeking the delegation of votes from other investors. They act in a similar way to Proxy Advisors, entities that comb the capital of companies and in many cases, obtain proxy votes”, he adds.
According to the study ‘Lazard’s Review of Shareholder Activism 2022’, in addition to this 36% increase in activity, in the past year, each quarter experienced an interannual increase in the activity of new campaigns, and the fourth quarter of last year it marked the second busiest in the last four years, all after a record first quarter.
After a slow start to the year, campaigns increased, due to initiatives related to mergers and acquisitions, which represented 41% of all in 2022. The rebound was due to the questioning of these corporate operations, which translated into an increase in requests to break the operation. “Adverse market conditions called into question the goodness of many of them,” he adds.
Technology was the most frequently “attacked” sector in 2022, accounting for 21% of activist targets. The extraordinary drop in stock valuations created a favorable environment for activists, who approached the sector in record volumes, especially in the US, where the tech sector accounted for 27% of 2022 campaign activity.
Activists won 108 council seats in all of 2022, representing a year-over-year increase of 21%.
According to Pedro Pasquín, vice president of Lazard in Spain, “capital flows to activist funds continue to grow in the first quarter of this year, which suggests that they will be very decisive in the current context of market volatility.”
