Hedge fund managers are constantly using new tools and strategies to generate more return on their investments. One particular strategy is taking an active stance in company affairs with the goal of initiating change to increase company valuation in the market. This approach can be non-confrontational or very public and highly confrontational. For example, Carl Icahn took more of a non-confrontational approach at Pep Boys on December 4, 2015, which ultimately ended up in a sale of the company. On the other hand, Starboard Value publically threatened to remove the entire board of Yahoo through a proxy fight on March 24, 2016, which led to four new independent directors joining the company’s board of directors. Given the significant impact investor activists can have on the market, we decided to analyze a series of recent investor activist campaigns across three main dimensions.
- Change in the number of investor activism campaigns by year.
- Classify all investor activism campaigns in 2014 and 2015 as either non-confrontational or confrontational and then compare the results.
- Identify which industries activist investors are targeting for investment.
The first part of the analysis was to determine the change in the number of investor activism campaigns by year. As the above chart demonstrates, the total number of investor activism campaigns increased from 287 in 2013 to 381 in 2014 representing a growth rate of 32.8%. From 2014 to 2015, there was a slight decrease representing a rate of negative 1.3%. This could signal that activist investors are beginning to slow down amid changing market dynamics.
The second step of our analysis was to classify all investor activism campaigns in 2014 and 2015 into two categories: confrontational and non-confrontational. In doing so, we noticed that the majority of investor activism campaigns fell into the confrontational category (59.6% in 2014 and 63.8% in 2015). The other interesting trend is that the number of confrontational campaigns seems to be increasing while the number of non-confrontational campaigns seems to be decreasing. This could mean that more of the new activist investor campaigns in 2016 will be highly public and confrontational in nature.
The last part of our analysis concentrates on which industries activist investors are targeting for investment. We used the above chart and determined that information technology, financials and consumer discretionary industries are experiencing the most investor activism campaigns. Together they represent 64.8% and 67.3% of all investor activism campaigns in 2014 and 2015, respectively.