SOURCE: The Mergermarket Group

October 16, 2012 10:00 ET

Shareholder Activism Expected to Increase for Remainder of 2012 and Into 2013

Schulte Roth & Zabel Releases Shareholder Activism Insight Report

NEW YORK, NY--(Marketwire - Oct 16, 2012) - Schulte Roth & Zabel LLP, a leading law firm serving the financial services sector, today announced the findings of the firm's third edition of the Shareholder Activism Insight report, produced in association with mergermarket. According to the report, shareholder activism is expected to rise in the fourth quarter and into 2013 as investors push for management changes at companies that have performed poorly on a consistent basis. 

Based on a series of interviews with corporate executives and activist investors, the report provides an in-depth review on emerging trends in shareholder activism, as well as insights into the changing corporate landscape investors and executives will face in the coming years.

The industries expected to see the biggest increase in shareholder activism are financial services, industrials and chemicals, technology, and energy. The majority of respondents (79%) expect the financial services industry to experience the most shareholder activism over the next 12 months, reasoning that investors are still looking to repair the industry after the 2008 crash.

"Given the damage and upheaval launched by the financial crisis, it is not surprising that the financial sector has been regularly identified in our surveys (in 2008, 2010 and this current survey) as the sector anticipated to be the most active. Investors are still looking for responsible governance and improved results from this critical industry," commented Marc Weingarten, chair of the business transactions group and co-head of the shareholder activism practice at Schulte Roth & Zabel.

Respondents disagreed markedly on the issue of board representation. Activist investors unanimously agree that shareholders should have board representation whereas only 36% of corporate executive respondents believe they should.

"The extent to which corporate executives take a dim view of shareholder representation on the board of directors is surprising and a significant change from prior surveys. This attitude suggests that there may be more contentious contests between companies and activists in the future as companies may be more likely to fight to keep shareholder representatives out of the board room," said David E. Rosewater, Schulte Roth & Zabel M&A partner and co-head of the shareholder activism practice.

Respondents to this survey report a busy 2012 proxy season for investors and company managements. The primary demands of shareholder proposals featured voting rules, operational changes, and board nominations, among others. The majority of shareholder activist respondents and plurality of corporate executive respondents expect between 20% and 30% of the proposals will have received majority support.

Additional findings:

  • According to 44% and 34% of respondents, respectively, corporate governance and poor performance by management are the top drivers of efforts to unseat board members.
  • Shareholder proposals will increase over the next 12-24 months, according to 84% of respondents.
  • Investors' expectations of activist opportunities appear to be on the rise as a 60% majority say they are comfortable with committing 10% to 15% of assets under management to such investments. Only 6% of respondents were as comfortable with this allocation in 2010.
  • One quarter of corporate executives think 30% or more of shareholder proposals will receive majority support.

Click here for a PDF of the full report.

About Schulte Roth & Zabel LLP

Schulte Roth & Zabel (www.srz.com) is a full-service law firm with offices in New York, London and Washington, D.C. As one of the leading law firms serving the financial services industry, the firm regularly advises clients on corporate and transactional matters, as well as providing counsel on securities regulatory compliance, enforcement and investigative issues. The firm's practices include shareholder activism; investment management; mergers and acquisitions; bank regulatory; business reorganization; distressed investing; employment & employee benefits; environmental; finance; individual client services; intellectual property, sourcing & technology; litigation; real estate; regulatory & compliance; securities & capital markets; structured products & derivatives; and tax.

About mergermarket

mergermarket is an independent Mergers and Acquisitions (M&A) intelligence service, with the largest network of dedicated M&A journalists on the ground in 65 locations across the Americas, Asia-Pacific, Europe, the Middle East and Africa. This team focuses on gathering actionable proprietary intelligence, creating the only origination database of live targets and bidders. mergermarket is also an unrivalled source of deal history. Public and private deals across a range of sectors can be searched using an exhaustive database. This proprietary intelligence and historical deals database is available to over 145,000 individual subscribers from more than 1,600 of the world's principal advisory firms, investment banks, law firms, private equity firms and corporates. mergermarket is part of The Mergermarket Group, which has over 600 employees worldwide and regional head offices in London, New York and Hong Kong.

Contact Information

  • Contacts:

    Schulte Roth & Zabel LLP
    Linda Sparn
    Email Contact
    +1 212.610.7409

    Rubenstein Associates, Inc.
    Carolyn Sargent
    Email Contact
    +1 212.843.8030

    The Mergermarket Group
    Dara Silverstein
    Email Contact
    +1 646.378.3118