Activist investors mount record number of campaigns but win fewer board seats

By Svea Herbst-Bayliss

NEW YORK (Reuters) - Activist investors mounted campaigns at a record number of companies globally during the first six months of 2024 but have been less successful in breaking into boardrooms as companies fought back effectively, data from Barclays shows.

Recent notable examples include Elliott Investment Management's targeting of Southwest Airlines, while Starboard Value is taking on design software maker Autodesk and Jana Partners is pushing for changes at silicon carbide maker Wolfspeed.

The surge in activity may lead to more costly battles between activist shareholders and management over leadership changes, spin-offs and outright sales in the coming months, bankers, lawyers and investors said.

But uncertainty surrounding when interest rate cuts might come, geopolitical turmoil and a looming U.S. presidential election that could spell big changes in regulatory regimes, could also make corporate fights tougher.

"We are seeing more activity but fewer transactions and that means activist investors may have to dig in and stay around for longer," said Jim Rossman, global head of shareholder advisory at Barclays.

In the first half of the year, Barclays tracked 147 activist campaigns, toppling the previous record of 143 set during the first six months of 2018.

In the second quarter, 86 campaigns were launched, fueling the feverish pace. Elliott was the busiest activist, launching 11 new campaigns this year and committing some $11 billion in capital, the data showed.

While not every campaign is about board seats, the number won provides a good measure of how well companies are defending themselves. During the first half, dissidents won 74 seats, down from 93 in the same period a year ago though prominent activists put in a strong showing in reaching agreements to join boards.

In U.S. proxy fights, activists won only 11% of the seats they sought, down from 65% during the same time in 2023.

Management often persuaded shareholders that current leaders were already pursuing the right strategy and that their board directors were more qualified than the activists' nominees.

For example, hedge funds Trian Fund Management and Blackwells Capital lost their high-profile fights to seat nominees at entertainment giant Disney and shareholders at wireless tower owner Crown Castle rejected co-founder Ted Miller's appeal to elect him and others to the company's board.

Last year, the average activist had returns of 18%, according to Hedge Fund Research, which may have prompted newcomers to try their hand at corporate fights. Returns for the first five months of 2024, however, have been flat.

Veteran activists including Elliott, which joined the Crown Castle board, and Carl Icahn, who was handed two seats at JetBlue, are still securing directorships. The Barclays data showed 24 seats were obtained by "major activist hedge funds" in the first half, compared with 29 in all of 2023.

Pushing for change at tech firms, such as Sachem Head Capital Management's success in joining the board at cloud communications firm Twilio this year, remained a popular trend.

But bankers, lawyers and investors also say some investors are shifting their focus to industrial companies.

(Reporting by Svea Herbst-Bayliss; Editing by Edwina Gibbs)