Public companies are increasingly being targeted by activist investors and there are now nearly 1,000 activist campaigns – also known as shareholder attacks – every year. This is up from a total of 20 two decades ago, according to a report by Bain & Company.
An activist investor is a person or hedge fund that buys a large stake in a public company and pushes for changes to the way it is run. This is usually done with the aim of creating more value for shareholders but activist campaigns have also been run to force a change of leadership, push for share buybacks or special dividends, restructure a company or alter its approach to ESG.
Activist investors gain control and influence through the purchase of shares and can sometimes push for representation on the board in order to take a more active role in the management of the business.
While activist action can improve shareholder value, the experience can be disruptive for businesses, especially when a campaign is launched unexpectedly or puts pressure on companies to prioritises short-term gain over the long-term business strategy.
Activist investing is on the rise
As firms continue to grapple with geopolitical and economic headwinds, from growing trade tensions to inflation and slower growth, activists have become more vocal in demanding strategic and organisational change. In the pursuit of higher returns, they are more willing to hold leaders and boards accountable at companies they believe are underperforming.
A record 27 CEOs resigned as a result of activist investor pressure in 2024, including those at Starbucks, Gildan Activewear and Sensata Technologies.
The risk of being targeted by activist investors is growing. A survey of 146 CFOs by Bain & Company found that half had either already been targeted or expected to face activist action within two years. But only half report having an action plan.
Without a plan in place, firms are more likely to suffer disruption. Most CFOs who have already experienced activist campaigns say they wish, in retrospect, they had prepared more and 89% of targeted companies strengthened their defence strategies after the campaign ended.
The stakes are high. Companies must assess if they are ready to defend against these campaigns or risk losing control. Firms that are able to anticipate potential investor challenges and proactively initiate changes are the ones that will have the upper hand if, or when, activists come knocking.
Public companies are increasingly being targeted by activist investors and there are now nearly 1,000 activist campaigns – also known as shareholder attacks – every year. This is up from a total of 20 two decades ago, according to a report by Bain & Company.
An activist investor is a person or hedge fund that buys a large stake in a public company and pushes for changes to the way it is run. This is usually done with the aim of creating more value for shareholders but activist campaigns have also been run to force a change of leadership, push for share buybacks or special dividends, restructure a company or alter its approach to ESG.
Activist investors gain control and influence through the purchase of shares and can sometimes push for representation on the board in order to take a more active role in the management of the business.
