The first half of 2025 featured an increase in surprise settlements – with companies inking agreements with activist investors when the activist has yet to publicly agitate.
Case in point: Charles River Laboratories said on May 7 that it struck a cooperation agreement with Elliott Management to replace four members of its Board with a senior executive at the hedge fund and three additional directors and to conduct a strategic review.
Usually, companies sign a peace deal with activists after public jousting via press releases, letters, media reports and other public avenues – or at a minimum, the activist has publicly revealed its position to create some pressure on the Company.
In Charles River’s case, the market had no prior knowledge of Elliott’s position and engagement with the company.
According to Barclays, there were 37 activist settlements in the U.S. in the first half of the year, up from 28 in the same year-ago period. Barclays tracks companies that are $500 million in market value or larger.
Of those 37 settlements, nearly half were struck without a prior public campaign announcement.
Other notable examples include CoStar Group’s settlements with D. E. Shaw and Third Point and PagerDuty’s settlement with Scalar Gauge.
Several factors appear to be driving the rise in these types of deals.
Chief among them is that macroeconomic uncertainty continues to weigh on companies.
Markets remain volatile, with fiscal and geopolitical pressures looming over executives running domestic and global businesses.
Combine the murky economic picture with a company whose shares are undervalued and an activist hedge fund bringing high-quality board candidates and criticisms that may resonate with a frustrated shareholder base, and the cost and distraction of a fight seems less appealing to Boards than it did a year ago.
Additionally, while newer hedge funds trying to make a name for themselves or funds that are in dire need of fundraising dollars will still opt for noisy public campaigns, more established activists recognize the abovementioned macro pressures on companies and are embracing private engagement as a constructive starting point to get what they want.
With market sensitivity high, keeping activist talks under wraps is increasingly a favored route.
Deciding whether to fight or settle has always been at the heart of defense strategy, with companies weighing considerations such as negotiating position, cost and potential disruption to the business.
If a company decides to fold too quickly and quietly, the management team and board run the risk of upsetting institutional and retail investors who want them to dig in their heels.
At the same time, waging a fight with a weak hand creates its own added risk.
Volatility and macro factors are impacting dissidents too.
Barclays recorded 129 global activist campaigns in the first half, a 12% drop from the year ago period.
But, for activists who struck deals so far this year – surprise ones or not – their campaigns were largely rewarded: U.S. activists seized 86 board seats, a 16% uptick from the year-ago period.