The 2017 Proxy Season:
Globalization and a new normal for shareholder activism
Download PDF Report

EXPLORE THE INSIGHTS
read more

As the 2017 proxy season came to a hectic close, activist assets under management and campaign volume remained relatively flat compared to the 2016 proxy season, at $121 billion AUM1 and 606 campaigns,2 respectively. These numbers do not tell the whole story, however, as the year bore witness to the continued emergence of a longer-term trend of multi-demand, value-oriented agendas, as activists around the globe drive the strategy’s evolution.


Normalization of shareholder activism across global markets

Investors around the globe continue to use activist tactics to bring about change. As a result, shareholder activism has become an accepted strategy across global markets, even in regions once believed to be hostile or structurally difficult for campaigns.

After several years of growth, global activist campaign volume dipped by 6% in 2017, with nearly every region experiencing a modest decline in new campaigns, year-over-year. The U.S. market, in particular, seemed to settle into a ‘new normal’ of campaign volume, accounting for 54% of global volume, as the strategy gains footing in international markets.

327 (54%) 119 (20%) 86 (14%) 74 (12%) #/ % of global activism activity a Represents the following campaign types: board control and representation, enhance corporate governance, maximize shareholder value, remove director(s), remove officer(s) and vote/activism against a merger. Sources: FactSet SharkRepellent and Activist Insight, as of June 30, 2017 2017 global activist campaigns a

Smaller funds drove 2017 campaign activity

With larger funds on the sidelines in 2017, smaller funds were particularly active. These small companies focused their efforts on micro cap to mid cap companies where they could build significant positions and potentially gain more traction with management and boards. Accordingly, nearly two-thirds of all campaigns targeted companies with a less-than-$500mm market cap.3


Institutional investors have become activists

During the 2017 proxy season, institutional investors — mutual funds, investment advisers and pension funds — announced 44 campaigns, representing approximately 13% of total U.S. campaign volume.4 While these investors have historically voted on governance issues according to their respective proxy voting policies, more than half of their 2017 campaigns were instead aimed at “maximizing shareholder value,” a campaign type that is generally used by traditional shareholder activists to encompass a wide range of strategic and corporate actions.

50%+

campaigns aimed at maximizing shareholder value


Companies continue to settle rather than engage in a proxy contest

Continuing a trend from recent proxy seasons, only 19 of the 54 completed U.S. campaigns involving a proxy contest culminated in a vote, as many companies chose to settle with activists instead. Activists were at least partially successful in 47% of contests that went to a vote in 2017.5

annual meeting cycles 1.4 who, in exchange, agreed to an average standstill duration of Companies granted an average 1.7 seats to activists 35 settlements disclosed in the U.S.

Preparing for and responding to shareholder activism

Activist campaigns can be highly disruptive to target companies, particularly if the management team and board are unprepared. David Hunker, Head of Shareholder Activism Defense, discusses best practices for preparing for and responding to shareholder activism.

Watch now icon



Download report

1 Source: HFR Q1 Global Hedge Fund Industry Report, as of March 31, 2017.

2 Sources: SharkRepellent and Activist Insight, as of June 30, 2017. Represents the following campaign types: board control and representation, enhance corporate governance, maximize shareholder value, remove director(s), remove officer(s) and vote/activism against a merger.

3,4,5 Source: FactSet SharkRepellent, as of June 30, 2017. Represents the following campaign types: board control and representation, enhance corporate governance, maximize shareholder value, remove director(s), remove officer(s) and vote/activism against a merger.

Related Insights

This material (including market commentary, market data, observations or the like) has been prepared by personnel in the Mergers & Acquisitions Group of JPMorgan Chase & Co. It has not been reviewed, endorsed or otherwise approved by, and is not a work product of, any research department of JPMorgan Chase & Co. and/or its affiliates (“J.P. Morgan”). Any views or opinions expressed herein are solely those of the individual authors and may differ from the views and opinions expressed by other departments or divisions of J.P. Morgan. This material is for the general information of our clients only and is a “solicitation” only as that term is used within CFTC Rule 1.71 and 23.605 promulgated under the U.S. Commodity Exchange Act.

RESTRICTED DISTRIBUTION: This material is distributed by the relevant J.P. Morgan entities that possess the necessary licenses to distribute the material in the respective countries. This material is proprietary and confidential to
J.P. Morgan and is for your personal use only. Any distribution, copy, reprints and/or forward to others is strictly prohibited. This material is intended merely to highlight market developments and is not intended to be comprehensive and does not constitute investment, legal or tax advice, nor does it constitute an offer or solicitation for the purchase or sale of any financial instrument or a recommendation for any investment product or strategy.

Information contained in this material has been obtained from sources believed to be reliable but no representation or warranty is made by J.P. Morgan as to the quality, completeness, accuracy, fitness for a particular purpose or non-infringement of such information. In no event shall J.P. Morgan be liable (whether in contract, tort, equity or otherwise) for any use by any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained herein and such information may not be relied upon by you in evaluating the merits of participating in any transaction. All information contained herein is as of the date referenced and is subject to change without notice. All market statistics are based on announced transactions. Numbers in various tables may not sum due to rounding.

J.P. Morgan may have positions (long or short), effect transactions, or make markets in securities or financial instruments mentioned herein (or options with respect thereto), or provide advice or loans to, or participate in the underwriting or restructuring of the obligations of, issuers mentioned herein. All transactions presented herein are for illustration purposes only. J.P. Morgan does not make representations or warranties as to the legal, tax, credit, or accounting treatment of any such transactions, or any other effects similar transactions may have on you or your affiliates. You should consult with your own advisors as to such matters.

The use of any third-party trademarks or brand names is for informational purposes only and does not imply an endorsement by JPMorgan Chase & Co. or that such trademark owner has authorized JPMorgan Chase & Co. to promote its products or services.

J.P. Morgan is the marketing name for the investment banking activities of JPMorgan Chase Bank, N.A., J.P. Morgan Limited, J.P. Morgan Securities LLC (member, NYSE), J.P. Morgan Securities plc (authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority), J.P. Morgan Australia Limited (ABN 52 002 888 011/AFS License No: 238188 and regulated by Australian Securities and Investments Commission) and their investment banking affiliates. J. P. Morgan Securities plc is exempt from the licensing provisions of the Financial and Intermediary Services Act, 2002 (South Africa).

For Brazil: Ombudsman J.P. Morgan: 0800-7700847 / ouvidoria.jp.morgan@jpmorgan.com

For Australia: This material is issued and distributed by JP Morgan Australia Limited (ABN 52 002 888 011/AFS License No: 238188) (regulated by ASIC) for the benefit of “wholesale clients” only. This material does not take into account the specific investment objectives, financial situation or particular needs of the recipient. The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JP Morgan Australia Limited.

© 2017 JPMorgan Chase & Co. All rights reserved.

 

Copyright © 2017 JPMorgan Chase & Co. All rights reserved.