2025 activism playbook

What were the key trends and hot topics in 2024?

Globally, shareholder activism in 2024 continued to rebound from the pandemic downturn, with campaign activity nearly at the record levels reached in 2018. 

The US and APAC remained the focus for global activism, representing 44% and 29% respectively based on campaigns initiated, while the level of activity in Europe slightly declined compared to the highs of 2023, from 28% to 21% (Barclays Shareholder Advisory Group, 2024). Within Europe, the UK continues to be the most popular jurisdiction for activism, accounting for 39% of European campaigns. 

We have also seen a number of developments, including a change in activists’ demands, tactics and identity. The trend of targeting large and mega-cap companies has intensified, as more activists move away from their traditional mid-cap “sweet spot”. There have been notable examples of this both in the US (Starbucks, Texas Instruments, BlackRock) and in the UK (Reckitt). It is a trend that is particularly prevalent in Europe, with 21% of campaigns in Europe related to companies with a market cap over $25bn, compared to 15% in the US.

Though M&A has remained a primary demand of activist campaigns, there has been a greater focus on businesses’ strategy and operations than in 2023, featuring in almost a third of global campaigns. Board and management changes also remain a popular activist demand. Additionally, there has been a significant number of ESG campaigns, led by climate activists such as Follow This and ClientEarth, in relation to climate targets and greenwashing. Alongside campaigns to try to tackle climate change, we have seen pressure in the other direction from purely financial activists: for example, in July 2024 Bluebell published a letter to BP attacking “wasteful” spending on UK solar capacity and urging management to refocus on oil and gas.

In the UK we have seen a surge in companies (such as Rio Tinto, Glencore and Watches of Switzerland) facing activist calls to relocate their primary listing to the US or other jurisdictions, in the wake of some recent high-profile relocations. Activists may present the relocation in very straightforward terms, but the issues are frequently more nuanced, and it is not necessarily the case that the grass is greener on the other side.

We are also seeing increasing public engagement with boards and voicing of concerns that are more in line with US-style activism. Many traditional investors who have historically been reluctant to publicly criticise management are more readily backing activist campaigns or adopting activist tactics themselves. We are seeing activists use ever more innovative tactics in their campaigns, including social media. For example, Elliott Investment Management created a podcast as part of its bitter boardroom feud with Southwest Airlines.

What can companies expect for 2025?

Looking ahead, we expect levels of global activism to remain high and for UK companies to remain key targets in Europe, due to lower share price valuations and the UK’s relatively activist-friendly legal and corporate governance environment. 

We also expect to see the recent upturn in M&A activity to continue. This may lead to a return of “bumpitrage” tactics - where activists take stakes to try and sweeten announced deals - and more active calls for major spin-offs and break-ups in 2025. The Trump election may accelerate this trend in the US, as promises of deregulation and tax cuts for businesses provide a boost in the M&A market. However, the promise of protectionist policies could also dampen inbound and outbound M&A. The evergreen themes of governance change and strategy will remain high on the activist agenda.

The spectrum of activists has broadened in recent years, with new players entering the fray and institutional investors lending increased support to activist agendas. Alongside this, we have seen increased engagement from occasional activists and the growing prevalence of activist “swarms”, where multiple activists target a company over a particular issue, either as a coordinated group or separately. This can exacerbate the complexity of adopting effective defensive strategies, especially as in cases such as Reckitt, the activists’ demands are not always aligned.

We expect that some UK-listed companies will continue to face calls to relocate their primary listings, to the US or elsewhere, supported by arguments of higher valuations and access to greater liquidity. However, investors may start to take a more sceptical approach to some of these arguments as the experience of companies which have relocated start to serve as cautionary examples.

In relation to ESG, we expect companies will continue to face pressure from both climate-focussed and traditional activists, calls which may pull in different directions. We have seen that the increasing rules around ESG reporting are having a stimulating effect on ESG-driven activism, and this will likely continue. As companies navigate the journey to net zero, they will need to devise long-term strategies that balance the economic demands of shareholders with their societal and regulatory responsibilities.

As established activists continue innovating their playbook, and there are more campaigns by first-time and occasional activists, activist tactics are becoming increasingly unpredictable. We expect mainstream institutional investors will continue to take an increasingly “activist” position with investee companies. However, we anticipate this will continue to be largely via private engagement and off-record briefings to the press. 

What should companies do to prepare?

The old adage that companies should be their own activist remains true. Activists are generally looking for a short- to medium-term return and will push for an actionable corporate event that can deliver that. Thinking like an activist, boards should consider possible lines of attack. Assessing what kind of changes an activist could seek, how it can rebut those challenges and defend its strategy. It should also use this exercise to stress-test strategy and see if changes should be made.

This will enable companies to be well advised to engage with major shareholders, ensure that their views are heard, and that the agreed strategy is communicated to and understood by them. Getting buy-in from institutional investors is vital and ensures that they do not use a live public situation as a chance to voice broader discontentment with management on strategy. It is also important for the board and management to show a united front on strategy, as activists will often exploit signs of division.

Day-to-day, companies should continuously monitor the share register for any signs of “stakebuilding” and should have a plan in place for dealing with initial contact from an activist.

As the landscape of activism continues to evolve with new players, tactics and demands, companies must remain vigilant and proactive in their strategies. By anticipating activist approaches and fostering strong relationships with shareholders, businesses can better navigate the challenges of activism and maintain resilience in an increasingly demanding environment.