Jeff (00:02):
Welcome to Solomon Connects. This is our M&A monthly podcast where we break down the key market forces shaping deal activity. I’m Jeff Jacobs, head of M&A and COO of investment banking here at Solomon Partners.
Chris (00:14):
And I’m Chris Moynihan, a director in the M&A group. Today, we’re going to be talking about activism. It’s February, and boards are beginning to nominate their candidates for the 2026 proxy season. So, we wanted to discuss activism and some of the impacts it’s been having on M&A lately; and broadly, some of the trends that we’re seeing in the market. Jeff, what are some of the latest trends you’ve been seeing?
Jeff (00:39):
We’re actually seeing a few different trends in the market. For starters, there’s simply more activity these days: The number of campaigns is up about 13% year over year, and more than 50% since the days of COVID. It’s a trend line we’ve seen steadily increase since 2020, and it’s not just mega-cap companies that are being targeted. Activists are increasingly going after mid-cap companies, which have expanded the universe of potential targets. I would say the nature of these campaigns has also changed. Activists are presenting themselves more like operating partners rather than hostile raiders. They’re trying to be constructive voices in pursuit of value creation rather than outside bullies picking a fight with management or with the board.
Chris (01:24):
Right, so, a little bit less of that Gordon Gekko personality and a bit more constructive -- but we’re still seeing the number of campaigns increase over time. We’re still seeing that pressure ratcheted up on management, even if it is private.
Jeff (01:39):
I think that’s right. The current wave of activists seems to be focused on engaging in real strategic dialogue; and interestingly, we’re seeing boards and management teams more willing to engage with them. Increasingly, activists come armed with industry knowledge or operating expertise that makes them more credible when advocating for change. We’ re also seeing the nature of their demands change in 2025: more than a third of activist campaigns involved demands around M&A and strategic alternatives. It doesn’t mean governance and board seats aren’t still big topics, but campaigns these days are frequently getting much more specific about pushing for sales or divestitures, especially when they perceive assets to be undervalued.
Chris (02:24):
And for the board that’s valuing their demands, their first instinct, it seems, is not to always stonewall the activists. Instead, they’re looking for areas of engagement. Right?
Jeff (02:34):
Well, I don’t know that an activist is always the most welcome call, but certainly the preference is to avoid any sort of long, protracted proxy fight, which, beyond the time and the cost, can certainly end up being a real distraction. Sometimes it’s better to see if there is merit to someone’s argument before instantly ignoring or dismissing a claim. Now, we know clearly not every activist is equally constructive. Some still push agendas, which really show that they don’t understand a business or the complexity of what might be going on in an industry. And, in these situations, boards obviously still have defense mechanisms at their disposal when they may deem an activist’s demands to be at odds with what is in the best interest of their shareholders.
Chris (03:20):
One of the things you noted earlier, which I think is worth revisiting, is that the demands are changing. It’s not just focused only on the financial, the dividends or the governance changing management. More and more, it’s focused on pushing for strategic changes, looking at M&A divestitures sales to enhance shareholder value.
Jeff (03:42):
Yes, activists are getting far more specific. It’s not just a message about improving governance. They’re identifying underperforming segments. They’re pushing for asset sales and even partnering with private equity firms to catalyze a transaction. In fact, part of the activist playbook these days can be to take a second bite of the apple by first taking a stake in advocating for change, and then by partnering with private equity to take a business private in what they view as a value-unlocking transaction.
Chris (04:11):
That’s interesting, and I feel like one of the other things we’re seeing too is that campaigns are moving from initial engagement to strategic action within months, not years.
Jeff (04:21):
That’s true, and it means that boards today have less time to react. Activists are showing up prepared, they’re presenting compelling cases quickly, and gaining support from shareholders who may also be eager for change.
Chris (04:35):
So, let’s talk about this proxy season. If activism is evolving and campaigns are accelerating, what should boards be doing right now to repair?
Jeff (04:44):
The best place to start is really with your own self-assessment. Boards should regularly evaluate their own performance and vulnerabilities the same way an activist would. Are there value gaps? Any operational underperformance? Are there better ways to allocate capital? This is frequently where investment bankers get involved to help. We often work with clients to go through a full strategic assessment of a business. Doing these exercises every year or so helps to ensure that a company isn’t becoming complacent, and that it’s consistently challenging itself to optimize performance and to identify paths to increase shareholder value. I think a communication plan is also critical. Boards should clearly articulate a company’s strategy-- its performance, its priorities. It’s often when companies fail to communicate effectively that you see an activist step in to fill that vacuum. I also always suggest that companies do some scenario planning. Boards should run through the what-if-an-activist-calls-tomorrow exercise, understand where an activist might focus and how the board would respond. Another point would be proactive shareholder engagement. It’s critical -- and it’s important to know who your top holders are. Understand who may be receptive to any arguments an activist might make, who expects more regular communication. The last thing I would say is it’s okay to be open to ideas. Some activist proposals have merit, and it’s not an admission of defeat to listen, to evaluate them dispassionately based on their substance, not on who the messenger is.
Chris (06:14):
So, to summarize, activism today is faster, more sophisticated, and often more constructive than it’s been in the past. So, boards should prepare thoughtfully so they’re well positioned this proxy season.
Jeff (06:26):
Exactly. Preparation, communication, and self-assessment go a long way. Activism certainly isn’t going away, but boards can manage it effectively when they stay ahead of it.
Chris (06:36):
That’s great advice. Thanks, Jeff. And thank you to everyone for tuning in. Be sure to check out solomonpartners.com for more insights, and we’ll be back next month with another M&A update.
