For years, activist investors leaned heavily on the M&A lever when it came to pushing companies to boost shareholder value. That changed in the first quarter.
M&A-related campaigns came in at 29% of the total, well below the four-year average, Barclays data shows. Instead, dissidents pivoted to operational changes and capital returns. This change came at a time when geopolitical tensions intensified, sparking a surge in fuel prices and stock market turmoil.
The drop in M&A-related demands comes as M&A activity broadly saw a surge in Q1, despite the market turmoil. Global M&A transaction values rose 20% to $1.3 trillion in the first three months of the year, the strongest Q1 total on record, according to Bloomberg.
The divergence between activist M&A demands and a record-breaking deal market shows that dissident hedge funds are as sensitive to market turmoil as companies are. We’ve seen this pattern before – a similar pause occurred during the Covid-19 pandemic. Even the most aggressive activist hedge funds tend to loosen their grip when uncertainty looms.
Global activist investor activity fell 11% in Q1 to 62 campaigns, with major drop offs in Europe and Asia. The U.S. saw a 3% increase to 41 campaigns, according to Barclays.
The global pull-back in activist activity, however, does not mean companies can relax. In fact, activists secured 45 board seats through 18 settlements, Barclays data shows, and currently eight contests remain where 25 board seats are in play. Nine CEOs departed within a year of activist campaigns, matching the elevated four-year average, according to the bank.
Activist action will depend largely on the macro storm clouds pass. In the meantime, management teams and boards should use this window to examine their strategy and enhance their narrative to prepare for more dissident pressure when the market settles.