Shareholder activism refers to the actions taken by shareholders to influence the decision-making and operations of a company in which they hold shares
. It is a strategy employed by shareholders to advocate for changes in corporate governance, executive compensation, strategic direction, or other aspects of a company's operations. Shareholder activism can take various forms, including proxy
contests, shareholder proposals, public campaigns, and litigation.
When it comes to mergers and acquisitions (M&A), shareholder activism can have a significant impact on the outcome and process. Activist shareholders often view M&A transactions as opportunities to unlock value or address perceived deficiencies in corporate strategy. They may seek to influence the terms of a proposed deal, push for a higher sale price, or even attempt to block the transaction altogether.
One way shareholder activism impacts M&A is through the use of proxy contests. Activist shareholders may nominate their own candidates for the board of directors to gain influence over the decision-making process. By doing so, they aim to ensure that the board considers their interests and concerns when evaluating potential M&A transactions. If successful, these activist directors can exert significant influence on the outcome of the deal.
Shareholder proposals are another tool used by activist shareholders to impact M&A transactions. They can submit proposals to be voted on by all shareholders, which may include requests for additional disclosures related to a proposed transaction or calls for a shareholder vote on the deal itself. These proposals can create additional scrutiny and potentially delay or alter the course of an M&A transaction.
Public campaigns are yet another avenue for shareholder activists to impact M&A. They may use media outlets, social media
platforms, and other communication channels to voice their concerns or rally support against a particular transaction. By generating public attention and support, activists can put pressure on management and the board to reconsider or modify their approach to an M&A deal.
Furthermore, activist shareholders may resort to litigation if they believe that the terms of an M&A transaction are unfair or that their rights as shareholders have been violated. Lawsuits can delay or even derail a deal, as courts may need to review the transaction and potentially order changes or additional disclosures.
Overall, shareholder activism can significantly impact M&A transactions by influencing the decision-making process, altering deal terms, delaying transactions, or even preventing them from happening. Activist shareholders bring attention to potential issues, challenge management decisions, and advocate for changes that they believe will enhance shareholder value
. While their motivations and strategies may vary, shareholder activism serves as a mechanism to ensure that the interests of shareholders are considered and addressed during M&A transactions.