CHAPTER 04 Shareholder Activism Abates, but Not for Long: Significant Activity and Developments in 2020
The 2020 Context When the COVID-19 pandemic hit North American markets in early 2020, uncertainty prevailed, stock markets tanked and business activity floundered, leading some to predict a vast and fertile territory for activist investors. With some public companies experiencing stock price declines not seen since the 2008 financial crisis and activism firmly established in Canada, these predictions did not seem unreasonable. However, in the first half of 2020, activist activity in Canada decreased substantially. According to data from Activist Insight , the first six months of 2020 witnessed a 43% decline in the number of public activist demands in comparison with the same period in 2019. 82 Hostile bid activity was scarce during the same period, with only one hostile bid formally commenced. While the slowdown in activism may have provided some comfort to public issuers striving to recover from the pandemic, this lower level of activity is likely to be only temporary. With issuers continuing to grapple with the financial and operational effects of COVID-19 and M&A activity picking up steam, the opportunities these developments present for activists will likely entice them back into the fray. In fact, Canadian public M&A levels have remained relatively strong in 2020, suggesting that some issuers may seek a sale transaction as a safe exit from continued uncertainty. And with that level of activity, issuers and bidders alike will find themselves exposed to potential M&A activism. Issuers looking to bulletproof sale transactions and activists seeking to challenge deals will need to weigh various considerations. One of the most aggressive possible strategies in these circumstances is to use a “mini-tender” to build a sufficiently sizable minority position to leverage better transaction terms or an alternative offer. This tactic was used in two high-profile transactions in 2019, discussed below under “Mini-Tenders as a New Tool in M&A Activism?” Activist Demands in 2020: Key Highlights ACTIVISM DEMANDS DOWN DUE TO COVID-19 The decline in the number of Canadian companies subject to public activist demands through the first half of 2020 to June 30 (H1) is sizable (see Figure 4-1) – down by more than 40% compared with the corresponding period in 2019. However, Canada was not an outlier in this respect. Globally, activist demands declined by 31% compared with the corresponding period
The decline in the number of Canadian companies
subject to public activist demands through the first half of 2020 to June 30 (H1) is sizable – down by more than 40% compared with the corresponding period in 2019. However, Canada was not an outlier in this respect. Globally, activist demands declined by 31% compared with the corresponding period in 2019.
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Davies | dwpv.com
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