Shareholder Activism & Engagement – Roundtable Discussion, Financier Worldwide Magazine, June 2021

May 20th, 2021 01:42 PM Eastern Standard Time

While COVID-19 uncertainty depressed activist campaigns in 2020 to their lowest level since 2014, subsequent growth in market confidence has seen activism return in full force – an upward trend that has continued through the first half of 2021. Many of these campaigns have focused on management changes, governance and operational improvement, as well as environmental, social and political issues. As economies rebound and market participants gain more certainty as to the future, shareholder activism is likely to prosper in the years ahead.

FW: Reflecting on the last 12 months or so, what key trends would you say have dominated shareholder activism activity?

Grossman: M&A and capital return policy have historically been central areas of focus in activist campaigns. While 2020 saw fewer campaigns in these areas due to the uncertainty and liquidity issues arising out of the coronavirus (COVID-19) pandemic, it is expected that these areas will be a focus of activists in 2021 as the economy rebounds and market participants gain more certainty and visibility as to the future. Activist campaigns focused on management changes, governance and operational improvement, and environmental, social and political themes filled some of the void in 2020 from a dip in traditional M&A and capital return campaigns. These themes often resonate with institutional shareholders and activists. There is a continuing discussion among the investor community and boards of directors regarding how boards focusing on corporate purpose and other environmental, social and governance (ESG) issues aligns with the well-established duty of the board to take action that promotes shareholder value. Going forward, boards are likely to spend more time discussing the nexus between various ESG issues and long-term shareholder value.

Mehrbrey: The steady increase of shareholder activism in Germany over the past few years was only briefly interrupted by the outbreak of the COVID-19 pandemic. Initially, many activist shareholders halted or limited their activities in the beginning of 2020, be it due to unreliable markets or because adding pressure in these turbulent times was not deemed a profitable strategy. This pause, however, was succeeded by a quick recovery throughout the rest of the year. The virtual annual general meeting (AGM) has become the new main platform for shareholder activism. New legislation allowing companies to hold virtual AGMs came into force in April 2020, and without exception all major stock-listed companies have made use of this instrument since then.

Glover: After the pandemic struck, activists were relatively quiet. During the first half of 2020, they launched fewer public campaigns than they did during the same period in 2019. But during the second half of 2020, as market confidence grew, activism returned in full force, and more campaigns were launched than during the second half of 2019. This upward trend in activism has continued through the first half of 2021. Activists continue to make board composition a focal point of their campaigns. Our survey of public activist campaigns in 2020 involving companies with a market cap between $1bn and $10bn found that proposals to change board composition were made in over 60 percent of campaigns. Proposals challenging a company’s business strategy were the next most common type of proposal, made in just under 50 percent of campaigns. Approximately 40 percent of campaigns recommended that the company engage in M&A activity, either by selling or spinning off a business unit or selling the entire company. Activists also challenged company decisions to engage in M&A. Campaigns arguing for the return of capital to stockholders were significantly less common. This general pattern has persisted for several years.

Ulmer: Over the last 12 months we have seen significantly fewer activist campaigns than in the years before 2020. Activist shareholders have quickly realised that any campaign which would divert management’s attention away from addressing the challenges created by the pandemic would not be well received by the market. Consequently, Elliott’s public statement to hold back on campaigns over the course of the pandemic was more accepting the inevitable than anything else. It was a reasonable business decision, not a sign of philanthropy.

Crozier: COVID-19 depressed activism campaigns in the first half of 2020 to their lowest level since 2014, as many activists recognised that proxy contests would distract issuers from focusing on the urgent task of adapting their businesses to a rapidly changing business environment and wanted to avoid the reputational concerns of appearing as if they were taking advantage of unanticipated market dislocations. Following this lull, activism reemerged with 30 new campaigns in Q4 2020 as businesses generally adapted to the challenges posed by COVID-19. Notwithstanding the downturn in campaigns during the first three quarters of 2020, activist pressure resulted in the seating of 131 directors in 2020. While 82 percent of these new directors were seated through settlements, a level in line with prior years, the total number of dissident directors increased to its highest level since 2014 as a result of Starboard’s majority slate win at GCP Advanced Technologies, which saw eight dissident directors elected to a 10-member board, and Mack Cali’s eleventh hour settlement with Bow Street Capital placing eight dissident directors on a nine-member board. Majority slate nominations have continued in 2021.

“We are likely to see a renewed focus on M&A and capital allocation as the economy rebounds and market participants gain more certainty and visibility as to the future.”
— Richard J. Grossman

FW: What issues are likely to drive activist campaigns in the current market? To what extent do shareholder-friendly laws facilitate activism and make campaigns more likely to succeed?

Mehrbrey: Due to the pandemic’s negative effects on most companies, activist campaigns have been focused on long-term strategic objectives aiming at reestablishing former strength rather than extracting funds from already struggling corporations. As was the case prior to the pandemic, it can be expected that activist shareholders will continue to closely monitor ESG criteria going forward. While the new legislation has made it possible for investors from around the world to attend the virtual AGM without having to travel, it has also limited shareholders’ rights. In adherence to the new law, most corporations requested shareholders send in questions several days before the AGM and did not provide the opportunity to raise follow-up questions. This, in addition to far-reaching limitations to the right to challenge shareholder resolutions, significantly restricted shareholder activism during AGMs.

Glover: The issues that have driven activist campaigns in recent years are likely to continue to drive campaigns in the current market. Companies that have not refreshed their boards or that have pursued unsuccessful business strategies, and companies whose stock is underperforming relative to their peers, will continue to attract activists. These companies offer numerous levers that activists can push to generate a return on their investment. Activists are also likely to continue to look for opportunities to challenge announced M&A transactions by taking the position that the deal price is inadequate. We expect that activists will emphasise capital allocation and the return of capital to stockholders less often than other themes. Partly as a response to activist pressures, companies have become much more aggressive about managing their capital structures and deploying excess cash. As a result, there are fewer opportunities than there once were for an activist to generate quick returns by arguing that a company should return cash to its stockholders. Many companies have argued that the Securities and Exchange Commission (SEC) rules requiring activists and other investors to disclose their investments are not sufficiently demanding, and that activists are able to build their investment positions in secret.  They have complained that the proposed amendments to Form 13F and Rule 13f-1, which establish reporting requirements for large institutional investors, would decrease transparency, and have also renewed their argument that the 10-day window for Form 13D filings is too generous. The pressure that institutional investors and proxy advisory firms place on companies to adopt stockholder friendly governance provisions has strengthened the activists’ hand.

Ulmer: Shareholder activism did not die from COVID-19. It will come back as the impact of the pandemic on the economy and society as a whole continues to decline. In addition to ever-present and ever-growing ESG awareness and initiatives, it will be interesting to see whether managements’ responses to the pandemic become a new focus of future campaigns. Has management found a way to navigate the company through the pandemic and its aftershock in a rewarding way? Has it adapted the company’s business case and strategy to a post-COVID-19 world? How does the company protect itself against future disruptions to its supply chains? These might be topics picked up by activist campaigns in the near future. It goes without saying that legal frameworks which provide a solid level of minority protection consequently also provide an avenue for activist shareholders to bring such topics to the attention of boards, shareholders and stakeholders. The more shareholder-friendly the legal framework, the more inviting the jurisdiction is for activist shareholders.

Crozier: Developments in 2020 indicate the growing primacy of environmental and sustainability themes in activism campaigns. Previously, environmental and sustainability concerns were woven into the activist’s messaging as window dressing to draw support from index funds but were not central to the activist’s platform. Investors have come to recognise that ESG concerns are inherently tied to long-term shareholder value. The launch of new environmental and sustainability-focused activist funds, including Engine No. 1, Impactive Capital and Inclusive Capital Partners, is evidence that activists recognise the financially-material risks and opportunities related to sustainability dependencies. Engine No. 1’s director contest at ExxonMobil is premised on the argument that Exxon risks terminal decline if it continues to ignore the shift in consumer demands for cleaner energy. Activist fund The Children’s Investment Fund (TCI) is working alongside As You Sow, a non-profit shareholder advocacy group, to encourage 100 companies in the S&P 500 to adopt a ‘Say on Climate’ proposal whereby shareholders are given the opportunity to vote on an issuer’s emission reduction plans. There are media reports that TCI is considering proxy fights at non-compliant companies.

Grossman: We are likely to see a renewed focus on M&A and capital allocation as the economy rebounds and market participants gain more certainty and visibility as to the future. ESG themes are also likely to continue to be a focus of activist campaigns in 2021. Traditional activist tactics, including election contests, are starting to be used by ESG activists as evidenced by Engine No. 1’s campaign at Exxon. Accordingly, boards need to pay close attention to their ESG profile and ratings and not just traditional vulnerabilities that may attract activists.

“The launch of new environmental and sustainability-focused activist funds is evidence that activists recognise the financially-material risks and opportunities related to sustainability dependencies.”
— Arthur B. Crozier

FW: How would you describe the extent to which the coronavirus (COVID-19) pandemic has increased the threat of shareholder activism for companies and their boards?

Glover: The likelihood of an activist challenge may be greater in industry sectors that were particularly hard hit by the pandemic. In particular, companies that have been less successful than their peers in weathering the COVID-19 storms may be vulnerable. Stockholders of these companies may be receptive to activists’ argument that changes should be made. We have also seen activists take advantage of dips in the market to acquire stakes in potential targets.

Ulmer: While many activist shareholders gave their usual target companies a pause while they were weathering the pandemic, the significant drop of their share prices at the beginning of the pandemic offered excellent opportunities to build stakes that could serve as cornerstones of future campaigns. Upon entry, profits were likely irrespective of the success of potential upcoming campaigns. Coupled with the fact that the management teams of vulnerable companies were absorbed with combatting the pandemic rather than doing the homework required to prepare for or even avoid activist campaigns in the future, the situation created by last year’s events offers promising opportunities for activists. Boards are well-advised to focus on potential activist campaigns as soon as their minds and schedules free up from firefighting.

Grossman: The COVID-19 pandemic caused many companies’ stock prices to decline, particularly in early 2020, which led many companies, including large-cap companies, to become more vulnerable to activists. While the total number of activist campaigns slowed in 2020, likely because of the onset of the pandemic at the beginning of the normal cycle of activist campaigns, many larger, more prominent activists have maintained significant funds to invest and are looking for potential opportunities with limited downside and possible significant upside. As we entered 2021, many factors that muted 2020 activist activity abated, including that many market participants have been able to effectively adjust to remote working and the need to conduct business under a ‘new normal’ environment, the potential for greater certainty and visibility as the economy stabilises with the rollout of vaccines, and the increasing level of M&A activity in the second half of 2020 that has continued into 2021. These factors mean that any company may be the target of activism, but may cause particular concern for companies whose stock price has not fully recovered from the initial stock market decline resulting from COVID-19.

Crozier: Companies that did not successfully adjust to the new and highly competitive COVID-19 economy, effectively manage their remote workforce, digitalise their business connectivity, and reposition their businesses to changing consumer behaviour will be ripe targets for activism. Activists have already targeted companies that lagged peers in adjusting their business models to the realities of the pandemic. Third Point targeted Disney by demonstrating that Disney+ did not take advantage of the increase in viewership caused by the pandemic, especially as compared to Netflix. Similarly, Third Point pushed Intel to replace its chief executive after criticising the company for, among other things, falling behind Advanced Micro Devices, which took advantage of the pandemic-related increase in online gambling. Considering the widely disparate impacts of COVID-19, it may be easier to demonstrate that change is warranted at companies that have lagged their peers.

Mehrbrey: After initially reducing shareholder activism, the pandemic subsequently led to an increase in activism for several reasons. First, the pandemic highlighted existing problems, making them more apparent, which, in turn, has provided activist shareholders with greater incentive to interfere. Secondly, the pandemic left many companies in a vulnerable condition which activist shareholders have been inclined to capitalise on to further their objectives. This effect is amplified by the fact that many hedge funds and other active investors have accumulated large amounts of capital and are seeking profitable ways to invest it. This is particularly true in Germany, where the market has recovered more quickly from the pandemic than markets in other jurisdictions.

“In many cases, from an activist shareholder’s perspective, public campaigns have proven to be more efficient than exercising statutory minority rights.”
— Kim Lars Mehrbrey

FW: What insights can you provide into the various approaches activists are taking to exert their influence and effect change? To what extent have tactics and methods evolved in recent years?

Crozier: While activism tactics have not changed dramatically over the last few years, they have been sharpened in certain areas. Activists will often go public well in advance of shareholder meetings as a way of putting sustained pressure on the company’s board to achieve an early settlement. Well qualified, independent nominees are now the norm, although an activist employee is often also on the slate. Detailed white papers showing the activist’s concerns and solutions are de rigueur, particularly among large activists. Recognising the important role of large index funds due to their typical ownership levels, which is usually 15-20 percent of a company’s outstanding shares, activists have been building relationships with those investors and highlighting their particular areas of concern, such as environmental and social issues as they affect the ability to deliver shareholder value.

Mehrbrey: The main forum for shareholders in Germany to exert influence is usually the AGM. As a general concept of German law, the AGM is the only forum where shareholders of a publicly listed company can exercise their shareholder rights. But there are certain limitations during virtual AGMs. Even though the AGM remains the most popular playing field for activist tactics and is still used to thoroughly challenge management, there are several other options available to activists. For example, activist shareholders often put pressure on management by other means, such as writing letters that are often leaked to the media and launching increasingly professional media campaigns. Commissioning inquiries, often into allegations of compliance issues or other breaches of duty by the management, has also become a popular activist technique in recent years.

Grossman: Activists continue to be very sophisticated. They frequently partner with other shareholders that they have gotten to know through other campaigns. In recent years, the lines have blurred between traditional shareholder activism, private equity and strategic companies pursuing M&A. There have been examples of traditional activist shareholders engaging in more traditional private equity transactions, such as outright acquisitions of companies, providing a private investment in public equity (PIPE) investment in a company or forming a special purpose acquisition company (SPAC), and some private equity firms have begun to implement more activist-like strategies. In addition, some traditional activists have continued the practice of teaming up with strategic acquirers or private equity firms pursuing M&A. In terms of larger cap companies, we have seen that a small position does not deter an activist and that they will still try to reach a resolution with the company in a private matter. Settlements are generally more common, and activists are more willing to determine if a private settlement can be reached.

Ulmer: Some activist shareholders can rely on their reputation in the market. Showing up on a company’s radar is sufficient to gain management’s attention and for engaging management in discussions. In such cases, significant changes can be effected without the related campaign necessarily coming to the attention of the wider public, at least not before requested changes are implemented. Elliott is one of these happy few. Others need to find ways to leverage their own impact. More and more often, they team up with institutional shareholders like mutual or pension funds that historically remained passive. They have started to make use of their influence and voting power, also by supporting selected motions brought up in activist campaigns. ESG topics nearly always tick the boxes and increasingly find the support of institutional shareholders. As a result, the right ‘packaging’ of campaigns leads to activist shareholders being able to boost their clout.

Glover: The basic playbook that activists use has not changed very much in recent years. Activists generally begin their campaigns by reaching out to the company and its board, making suggestions on steps the company should take to generate value for shareholders. If the company does not respond to the activists’ satisfaction, activists may go public with their complaints and attempt to win stockholder support. They may also launch a proxy context in which they seek to install activist-favourable directors on the board. The target company is faced with the difficult choice between engaging in a public fight with the activists that it may or may not win or settling and giving the activists at least part of what they want. There is no question that activists have become more sophisticated and that their tactics have evolved in a number of ways. Activists are now willing to challenge companies of almost any size in any industry and any geographic market. They have begun to make books and records demands under state corporate law and engage in other litigation to take advantage of discovery tools. They use social media to amplify their arguments and reach a broader audience. Activists have become much better at identifying directors to serve on the boards of the companies they target. The days when activists would propose under-qualified business associates as director candidates are long gone. They are now proposing candidates who have impressive resumes and business experience that would be directly relevant to the target company.

FW: Have any recent shareholder activist campaigns caught your eye? What lessons can we draw from the way they were conducted, as well as their outcome, such as board-level personnel changes or strategy shifts?

Mehrbrey: There is a general trend of recent activist shareholder campaigns becoming increasingly aggressive. Public campaigns aimed at highlighting mismanagement have become quite prevalent. In many cases, from an activist shareholder’s perspective, public campaigns have proven to be more efficient than exercising statutory minority rights. Given the lack of opportunities to spontaneously challenge management during virtual AGMs, as well as legislation making it harder for shareholders to ask follow-up questions and challenge shareholder resolutions, these means of promoting change will likely become more important. Thus, it has become essential for companies to develop and implement a sophisticated public relations strategy. In many recent cases, activist shareholders succeeded in achieving their goals, either by bringing about a change of business strategy or achieving change in the composition of the boards.

Grossman: One noteworthy campaign has been Engine No. 1’s campaign at Exxon to elect four new directors at Exxon’s 2021 annual meeting. Engine No. 1 is a new ESG-focused fund and a major focus of its campaign at Exxon has been pressuring the company to focus more on clean energy. Engine No. 1 is already being supported by CalSTRS and it will be interesting to see the outcome of Exxon’s annual meeting in May 2021 and whether Engine No. 1 is able to gain support from the index funds, which could be key not only to the success of Engine No. 1’s campaign at Exxon, but to the success of ESG-related campaigns going forward.

Ulmer: Although a rather special situation, the campaign Cerberus ran with respect to Commerzbank is remarkable. Cerberus holds stakes in Commerzbank as well as in Deutsche Bank, and behind the scenes played a significant role as a potential combination of the two leading German banks was being orchestrated. When this merger could not be realised, Cerberus changed tactics and pushed for a change of strategy at Commerzbank, including significant restructuring. Losing its patience, Cerberus increased the pressure on the bank’s top management through ‘open letters’, finally leading to the chief executive and the chairman of Commerzbank resigning from office. Other board members followed. In the old school German banking world this was perceived as more than bold, especially given that the German state has been the major shareholder of Commerzbank since the financial crisis. Although Cerberus did not succeed in filling all vacancies on the board with its candidates, taking on a German institution backed by the German state shows that there truly are no limits to the reach of shareholder activism any longer.

Glover: Without calling out specific campaigns, it has been interesting to watch activism become more common in foreign markets, and situations in which two activist firms are running campaigns directed at the same target. The power that the most successful activists can wield when they launch a campaign is noteworthy. Activists’ aggressive target-hunting, their willingness to test new themes across a wide range of industry sectors, and their ability to challenge very large companies, are also noteworthy.

Crozier: The settled proxy fight at Kohl’s is a good example of recent developments and tactics. A group of activists – Macellum Advisors, Ancora Advisors, Legion Partners and 4010 Capital – publicly announced a campaign in October 2020 at the retailer which customarily holds its annual meeting in May. All the activists except 4010 Capital had previously targeted Bed Bath & Beyond, another retailer, while Macellum and Ancora had targeted another retailer, Big Lots. The volatile consumer sector continues to be prime hunting ground for activists, particularly since the onset of COVID-19. Before the dissident group went public, the company was already executing a new strategic plan that was well received. The group originally announced a control slate of nine nominees for a 12-member board, but subsequently dropped their slate to five nominees. The ensuing proxy contest was settled approximately one month before the 2021 annual meeting with the addition to the board of two of the dissident group’s nominees, neither of which are employed by any of the dissident funds, as well as an independent director identified by Kohl’s and endorsed by the dissident group. The board also expanded the share authorisation in the company’s existing stock buyback programme.

“Activists’ aggressive target-hunting, their willingness to test new themes across a wide range of industry sectors, and their ability to challenge very large companies, are also noteworthy.”
— Stephen Glover

FW: What can companies do to proactively monitor the market, identify red flags and anticipate the onset of an activist campaign? How important is it to regularly engage with stakeholders?

Crozier: If a company is vulnerable to activism, it should retain a stock monitoring firm experienced in detecting accumulations by activists and other problematic investors to provide an early warning, since 13F or other public filings do not provide advance notice. At the same time, while skies are still blue, the company should undertake a disciplined shareholder engagement programme, including the large index funds, to ensure that investors are aware of the company’s strategy, to receive feedback and demonstrate attentiveness to shareholder concerns and to inoculate investors against the issues an activist is likely to raise. Independent members of the board should participate in these engagements, particularly with the large index funds, and need to be carefully prepped beforehand. Participants, especially board members, need to be able to discuss how environmental and sustainability concerns factor into the company’s strategy with the increasing number of shareholders, including, but not limited to, the large index funds, that view those concerns as crucial elements in delivering shareholder value.

Ulmer: For a company, monitoring obligatory capital market filings for emerging stakes or short positions is essential, but this should only be a minimum. Following analysts’ reports and other capital market coverage is equally important. In recent years, social media and the internet as a whole have become increasingly relevant in this regard. It is crucial to follow a holistic approach, complemented by regular contact with institutional as well as other shareholders, and all stakeholders with an interest in the company. Additionally, proxy advisers should not be forgotten in this context. Not only does such an approach provide some insight to management about how the company’s performance, business model and strategy are perceived by the market, it also helps to shape the company’s future in a way that finds the support from the relevant groups, particularly if the company becomes the target of an activist campaign.

Glover: Engagement with the stockholder base is the foundation of a successful response to an activist campaign. If a company’s executives, directors and investor relations team have an ongoing dialogue with stockholders, they can educate them about corporate strategy and identify and address stockholder concerns. Investors who believe that the company’s management is already listening to them are much less likely to be receptive to an activist’s arguments. After an activist arrives, the management team can take advantage of the relationships it has already established to explain the flaws in the activist’s arguments and seek stockholders’ ongoing support. Company management teams should also be in contact with sell-side analysts to ensure the analysts understand the company’s publicly disclosed strategy. If analysts identify problem areas, the company can attempt to address those concerns. When an activist arrives, the management teams should find it easier to explain their responses to analysts who have already been educated about the company’s plans. Companies should consider using a stock watch firm to monitor their stockholder base and look for unusual investment activity. This becomes particularly critical after an activist announces that it is on the scene. Companies should also compare their performance with their peers to identify relative strengths and weaknesses, since activists often base their campaigns in part on the argument that a company is doing less well than its peers.

Grossman: Every board of directors and company management team should be proactive in assessing their company’s vulnerabilities and identifying areas of potential improvement. In light of the increased influence of institutional investors, including passive index funds, it is easier for companies to target the stockholders they need to court to succeed in the event of an activist campaign. As a result, it is important for companies to devote time and resources to proactively engaging with major stockholders and other key stakeholders in order to be prepared if an activist emerges. Every company should also have a ‘break glass’ plan in the event an activist investor surfaces, to ensure the company is ready to respond quickly and effectively, and in a manner that is coordinated and tailored to the situation.

Mehrbrey: Monitoring their shareholder structure is very important for companies. They should encourage higher shareholder participation, particularly via the new means of virtual AGMs. By doing so, corporations reduce the risk of overrepresentation of activist shareholders. However, requesting shareholders send in questions before the virtual AGM and not permitting spontaneous or follow-up questions during it, often increases the divide between stockholders and management, which can increase the likelihood of activist campaigns. This should be considered when planning the stockholders’ means of participation. Additionally, corporations should also monitor the shareholder activism scene and new developments closely to be aware of new trends.

“For a company, monitoring obligatory capital market filings for emerging stakes or short positions is essential, but this should only be a minimum.”
— Michael J. Ulmer

FW: What issues do you predict will shape shareholder activism through 2021 and beyond? What steps should companies take to prepare and respond?

Ulmer: ESG will remain at the forefront of activist campaigns. Climate change dominates discussions around the globe, especially now that the new US administration supports most green initiatives again. The relevance of corporate responsibility and diversity will also continue to grow. While splitting up conglomerates, releasing valuable parts of a group from the burdens put on them by less dynamic affiliates, has been widely embraced, there are still many corporate structures that could be streamlined and corporate strategies that could be more focused. Activist shareholders will identify them as they have in the past. Preparing business models and corporate strategy for a post-COVID-19 world, implementing lessons learned from disrupted supply chains and the weakness of IT structures, could complement the list. Regarding preparation, it is certainly advisable to update the defence manual, reflecting the less stigmatised role of activist shareholders and the more positive image attributed to them. Activist shareholders are increasingly perceived as playing an important role within the market. As has been the case in the past though, the best possible defence is running a good business and increasing the value of the company. This negates the need for any response as it avoids an activist campaign altogether.

Glover: Activists may find ways to take advantage of a hot M&A market, either by making more vigorous arguments that a company should engage in an M&A event, or by challenging a deal that has already been signed on the theory that the seller could have done better. We should see more examples of situations in which institutional investors express their support for activist campaigns. ESG themes may gain additional prominence, and new activist funds that say they will focus on social impact investing may help drive ESG-oriented challenges. It remains to be seen, however, whether they will be able to make ESG issues the centerpiece of a successful campaign.

Grossman: M&A, whether whole company or strategic divestitures, and capital return policy are likely to continue to be a significant focus of activist campaigns. However, we have already seen that ESG has also been a focus of many campaigns. These themes often resonate with institutional shareholders. Activists – including new funds focused on ESG – likely will continue to pursue campaigns in these areas.

Mehrbrey: We expect to see more shareholder activism in the coming years. Activist shareholders will continue to conduct public campaigns to increase pressure on boards to meet their goals and influence the company’s strategic direction. Finally, it can be expected that the disruption and new legislation caused by the COVID-19 pandemic will be a major driver for shareholder activism in the coming years. Despite shareholder criticism, the legislation permitting virtual AGMs has been extended throughout 2021. So far, courts in Germany have been rather lenient toward corporations limiting stockholders’ rights because of the pandemic. As the crisis continues, dealing with new means of exercising stockholder rights during virtual AGMs will become a growing concern. This concern is likely to persist beyond 2021. The virtual AGM in one form or another is here to stay.

Crozier: M&A activism has been, and will continue to be, significant. The level of M&A activism will be strongly affected by the strength of equity markets, cash-saturated balance sheets, low interest rates and the resulting expected strong M&A rebound. Companies struggling with pandemic-related falls may face campaigns to force a sale of the company. Bumpitrage – campaigns to reject or improve announced deals – will likely continue to represent a substantial portion of M&A activism campaigns, especially as small cap companies with depressed stock prices are acquired on the cheap by peers whose stock prices rebounded following better crisis management. Companies must self-assess their performance, particularly in comparison to peers, and take a proactive approach with their investors, particularly large index funds, to demonstrate that management and boards are effectively addressing any performance issues and have a compelling strategy to deliver long-term shareholder value. It is generally too late to undertake such a programme after an activist goes public.

Michael J. Ulmer’s practice focuses on domestic and international private and public M&A transactions, joint ventures, general corporate advice and private equity transactions. His work extends to a broad range of industries and clients, including leading German corporates, Mittelstand companies, and domestic and international financial and strategic investors. He has vast experience in assisting clients from the Middle East with outbound investments. Mr Ulmer joined Cleary as a partner in 2016. He can be contacted on +49 69 97103 180 or by email:

Stephen I. Glover is a partner in the Washington, DC office of Gibson, Dunn & Crutcher and has served as co-chair of the firm’s global M&A practice. He represents public and private companies in complex mergers and acquisitions, joint ventures, equity and debt offerings and corporate governance matters. Mr Glover’s clients include large public corporations, emerging growth companies and middle market companies in a wide range of industries. He also advises private equity firms, individual investors and others. He can be contacted on +1 (202) 955 8593 or by email:

Dr Kim Lars Mehrbrey combines the experience and knowledge of being a former corporate and M&A lawyer with the skills of a professional litigator and arbitration counsel and has more than 20 years of relevant work experience in this field. He is very experienced in pursuing shareholder rights and advising companies and international investors in all kinds of shareholder disputes in the German market. He can be contacted on +49 211 13 68 473 or by email:

Arthur B. Crozier is chairman of Innisfree M&A Incorporated of New York and of Lake Isle M&A Incorporated, Innisfree’s wholly-owned UK subsidiary. Mr Crozier’s practice includes the representation of US and international clients in a wide variety of transactions and proxy contests, as well as annual and special meetings. In addition, he counsels an international roster of parties on corporate governance, shareholder engagement and executive compensation issues. He can be contacted on +1 (212) 750 5833 or by email:

Richard J. Grossman focuses his practice on proxy contests, responses to shareholder activists, corporate governance matters, M&A and leveraged buyouts. Mr Grossman has advised many companies with respect to corporate governance issues and responses to shareholder proposals. He also has represented companies in contested proxy solicitations and other contests for corporate control as well as unsolicited acquisition proposals. He can be contacted on +1 (212) 735 2116 or by email:

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About Innisfree

Founded in 1997, Innisfree M&A Incorporated (New York), along with its wholly-owned subsidiary Lake Isle M&A Incorporated (London), is a high-stakes shareholder engagement firm, delivering shareholder intelligence, strategic advice and proxy solicitation services to the world’s leading corporations and investors when it matters most. Its integrated approach and unsurpassed analytics–ActiveIQ™–set Innisfree apart as the firm of choice. Innisfree provides expert advice on a wide range of matters, including shareholder activism, executive compensation proposals, corporate governance issues and investor relations.

With an experienced professional staff in New York, London, Pittsburgh and Richmond, VA, Innisfree has represented hundreds of clients in over 20 countries.


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