The 2015 U.S. Proxy Season Through the Activist Lens

Lessons learned, emerging trends and implications for clients

The floodgates are open

Shareholder activism, particularly across the U.S. but also globally, marched forward during the 2015 proxy season, as investors continued their quest to generate alpha.

Activism expanded in terms of the number of fund managers pursuing activist strategies and the amount of capital deployed to further those goals. Support for activists increased, while the stigma of being associated with an activist campaign largely evaporated. Consequently, activists are pushing the limits of the tactics they employ to force change.

Lately, some of the most prominent names in activist investing have been raising funds and building up their war chests. According to Hedge Fund Research, activist assets reached $129.7 billion in the second quarter of 2015, 9% and 177% increases from the end of 2014 and 2010, respectively.

Five Major Trends in Shareholder Activism

1. New entrants are pouring into shareholder activism


The 2015 proxy season saw engagement in activism by more than 50 investors who had not previously or recently attempted to exert their influence.

2. Activists are shifting focus from governance demands to value maximization and, more specifically, from capital allocation stipulations to strategic changes

Success rate by demand type (2010-2015)1,2,3

Change in Strategy: 2010, 22.6%; 2015, 36.9%
Change in capital structure: 2010, 40.4%; 2015, 42.1%

Source: SharkRepellent; years reflect respective proxy seasons (e.g., 2015 is from 07/01/14-06/30/15)
1 Represents the following campaign types: board control and representation, enhance corporate governance, maximize shareholder value and remove director(s) and officer(s); classified by announcement date
2 Individual campaigns may be classified under various value demand categories
3 Closed campaigns only

3. The pursuit of proxy access continues; select pension funds are spearheading the effort and a majority of the proposals are passing


The 2015 proxy season saw a six-year high in the number of activist campaigns that threatened a proxy fight.

53% of all proxy fights resulted in a settlement between management and the activist in 2015.

Source: SharkRepellent; years reflect respective proxy seasons (e.g., 2015 is from 07/01/14-06/30/15)

4. International activism is on the rise, particularly in Europe, followed by Australia and Asia

After a slow 2014, Europe is seeing a resurgence in activity.

63.9% of all 2015 year-to-date interventions happened in the UK, Switzerland and France.

Map of Europe highlighting the UK, France, and Switzerland

Source: J.P. Morgan, Activist Insight as of 06/30/15

5. Investors are lessening their reliance on outside proxy advisory firms by conducting internal research and using those conclusions as a basis for voting

How? Establish new corporate governance teams and committees or transfer responsibility to the portfolio manager or analyst

These processes will diminish the influence that proxy advisory firms have over institutional investors and provide opportunities for companies to capitalize on improved shareholder outreach programs.

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For a copy of the full report, please contact your J.P. Morgan banker

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