As activism evolved into a mature asset class over the last two decades, the field inevitably became more crowded. For larger activist funds, the number of public company targets big enough to move the performance needle has also declined. Together, these trends spurred the emergence of the “activist swarm.” Not to be confused with the better-known “wolf pack” phenomenon, where a group of funds informally act together to achieve a common objective, an “activist swarm” results from multiple activists independently identifying and investing in the same target company at the same time.
Earlier this year, three prolific activists separately disclosed a stake in Salesforce, Inc., each with a seemingly different agenda and investment horizon. In January, it was reported that Elliott Management was preparing to nominate a slate of directors at the software company after taking a multi-billion-dollar position earlier in the year. Elliott publicly called for a sustainable leadership plan and increased management accountability by way of enhanced Board oversight. Just a few months earlier, Starboard Value had criticized the company’s subpar growth and profitability relative to its peers. At the same time, ValueAct Capital worked with the company behind the scenes, ultimately extracting a Board seat for the fund’s CIO Mason Morfit as a part of a settlement agreement (perhaps in an attempt to “inoculate” the Board). Elliott ultimately declined to run dissident director candidates at Salesforce’s annual meeting this year.
Similarly, Trian Partners earlier this year launched a public proxy fight for one board seat at The Walt Disney Company shortly after the company had settled with Third Point Management by adding one new independent director to the Board. Third Point has previously disclosed a position in the company and called for an array of strategic changes. After Disney announced a series of operating initiatives, Trian withdrew its nomination.
Activists understandably work hard to hide stake building in a target for as long as possible. Multiple activists showing up on a company’s register at the same time make an already complex and time-consuming process for a Board and management team that much more difficult to navigate. Last year, the number of “activist swarms” nearly doubled relative to prior years. Given the record amount of capital available to be deployed by activist funds, we will likely see more of these “activist swarms.” As always, companies that prepare in advance for the omnipresent risk of activism or hostile strategic interest tend to achieve more optimal outcomes compared to those companies that start the process flat footed.