Nobody is bulletproof from an activist campaign, and as we’ve seen throughout 2024, activist investors continue to get creative in how they target companies and with what tactics. But like the old expression says, when it comes to activism, the best offense is a good defense – meaning, preparedness is key and leadership and board members must be prepared to respond to a wide array of situations before they arise to see the most success.  

2024 in review 

With the first half of 2024 showing a nine percent increase in campaigns targeting U.S.-based companies, no public companies are entirely immune to the threat of an activist investor taking an interest in their business strategy and performance. Shareholder activism in 2024 also diversified across sectors. Traditional strongholds like technology and consumer goods continue to see robust activist interest, but there has been a marked increase in activity within energy and healthcare.  

This makes sense as activists target sector-specific issues, such as energy transition strategies in the energy sector, and drug pricing and innovation pipelines in healthcare. This sector-driven approach is further fueled by the emergence of specialized activist funds with deep expertise in these industries.  

Not only are activists getting creative in the industries they target, but they’re also evolving their tactics. Adding or replacing directors to a company’s board has long been the favored strategy among activists looking to force change in the face of management resistance. However, emerging tactics have gained momentum as lower cost alternatives, such as withholding vote campaigns and using non-binding proposals in coordination with institutional investors.  

What can companies do? 

Companies should conduct activism preparedness exercises to ensure their board and leadership teams are well equipped to strategically respond to activist scenarios before they occur. Sloane can partner with you to put together a robust preparedness plan:  

1. Analyze your business strategy and performance and assess how that has been perceived by the market and the analyst community 
2. Assess your corporate governance structure and Board composition, with a focus on future needs of the Company and how the Board’s expertise addresses those needs 
3. Comb through your investor communications, earnings scripts, and any press around your company to understand your positioning in the marketplace 
4. Speak with selected executives to hear an articulation of your strategy and what you perceive as your strengths and weaknesses among investors 
5. Identify specific areas of vulnerability that an activist could target and outline potential vectors of attack 
6. Develop a “playbook” of core key messages and strategic approach, tactics for each scenario, key messages for important stakeholder audiences and draft reactive and proactive materials 
7. Walk your executives through the plan, as needed, and help prepare a digestible summary for presentation to the Board, if required  

At the end of the day, what’s most important is preparedness. Companies can’t take for granted their standing with activist investors and must work strategically to defend against campaigns swiftly and forcefully. A strong plan, rooted in a deep understanding of vulnerabilities and the associated scenarios, is a great starting point. Remember, when we fail to plan, we plan to fail.  

Check out our full piece on the shareholder activism landscape here: https://bit.ly/2024Activism.

Sloane’s Special Situations team brings decades of experience in helping companies prepare for activist campaigns and strategically defend against campaigns from the early innings of engagement. We listen, work to understand the situation, determine the strategy and provide candid advice to executive management teams and Boards when they need it most. Learn more about us here: https://bit.ly/Sloane_Special_Sits.