Activity by activist hedge funds, both in the U.S. and abroad, has increased since the end of the pandemic.  In 2024, there was a slight increase in global activism campaigns compared to 2023, which saw a 9% increase in the number of campaigns compared to 2022.  Approximately one-fifth of S&P 500 companies currently have a known activist holding more than 1% of their outstanding shares, and there are many other companies at which activists covertly hold through derivatives.  Activists’ assets under management have also grown substantially in recent years, with the 50 most significant activists ending 2024 with over $200 billion in equity assets.  There has also been a proliferation of first-time activists in recent years.

The following key trends shaped and defined the 2024 activism season:

Continued Use of Settlements

In the second proxy season featuring the universal proxy card, settlement activity remained brisk.  Although there were a few high-profile activism battles that resulted in full proxy contests (including Norfolk Southern’s proxy fight against Ancora and The Walt Disney Company’s proxy fight against Trian Partners and Blackwells Capital), the vast majority of activism matters in 2024 were resolved through settlements.  While companies and activists have used settlements for many years to avoid proxy battles, the prevalence of settlements increased following the introduction of the universal proxy rules in 2022, and the proportion of activist campaigns that resulted in a contested shareholder meeting has correspondingly decreased.  Activists also tended to seek, and obtain, on average fewer board seats per campaign in 2024.

Not only did the frequency of settlements continue to increase last year, but so too did the speed with which activism matters were settled.  This led to a sharp increase in the number of settlements announced without prior public agitation by, or even rumors of, an activist in the company’s stock.  Several times in 2024, the first time the public learned of an activist’s engagement at a company was when a settlement was announced, suggesting there were many instances where activists did not need to put public pressure on the company to achieve their objectives.

There were also several instances where activist situations were settled without a formal cooperation agreement.  We should not be surprised if this trend continued, as it is clear that companies and activists—particularly more established ones—are becoming comfortable that a press release can achieve the same objectives without the formality and legal complexity of a cooperation agreement.

Companies Subject to Multiple Activists and Multi-Year Campaigns

In recent years, including in 2024, there has been an increase in the number of multi-activist campaigns, in which activists “swarm” the same company, particularly at marquee mega-cap companies.   The trend appears poised to continue into 2025, as evidenced by the successful campaign by Mantle Ridge and D.E. Shaw at Air Products, where shareholders elected three activist-nominated directors after a proxy fight and voted the company’s CEO off the board.  Companies facing multiple activists may experience increased challenges balancing the interests of various stakeholders against the potentially competing demands of different activists and, in certain cases, companies may find it beneficial to enter into a settlement with the activist most closely aligned with the company’s view.  Companies must also take care not to settle with one activist too far in advance of a company’s nomination window, providing a potential avenue of attack for other activists.

Activists are also targeting companies during multiple proxy seasons—for example, Trian’s successive campaigns against Disney in 2023 and 2024, Politan Capital’s two-year campaign against Masimo and Elliott’s repeat campaigns against Crown Castle in 2020 and 2023.  Companies that were able to resolve an activist situation in 2024, but continue to underperform in 2025, may find themselves subject to a second round of activism, even from a different activist.  Often, the activist objectives of a second-year campaign can be even more aggressive than the initial engagement, as the activist may seek to replace management or push the company into exploring strategic alternatives, on the view that shareholder patience has run out at a company that continues to underperform.  In such instances, it is important for companies not to fight the prior year’s battle, but rather to adapt to the facts and circumstances before them.

Rise of First Timers and Smaller Players

While the more established activists maintained their outsized role in the 2024 proxy season, around half of all activism campaigns in 2024 were led by a first-time activist.  When first confronted with activists with little or no prior track record, companies may find themselves unsure of the level of engagement to offer, particularly when the new activist is a fund that has a relatively small position in the company compared to other shareholders.  Companies should be aware, however, that even nascent or occasional activists are capable of garnering the support of ISS and Glass Lewis, and larger institutional holders, if they make a credible case for change and recruit qualified directors to their campaign.  Accordingly, the strategies for engaging with nascent or occasional activists do not differ greatly from those for dealing with established activists.  One point of difference is that newer and smaller players may be seeking publicity and validation to further their fundraising efforts, which can sometimes lead to more and faster public agitation and more erratic responses to engagement.

Activists Targeting CEOs

The prevalence of activist campaigns explicitly targeting CEOs has increased over the last few years, and even prominent CEOs and CEOs of large companies have not been immune.  While any activist campaign that criticizes a company’s strategy and operations can be viewed as an implicit attack on the company’s management, in 2024 activists were more often explicit in arguing that the CEO should be replaced.  In order to prevail in such a claim, activists have had to come into campaigns with their own alternative CEO candidate standing ready and willing to step into the shoes of the CEO they are targeting, even if only on an interim basis.  This can create an extra hurdle for activists to prevail in this kind of campaign, unless they can identify a CEO candidate with a proven track record as a replacement.

There was also an increased number of CEO departures and resignations at companies targeted by activists in 2024.  Although activists often seek to take credit for such management turnover, claiming that the CEO changes are a result of their campaigns, that is often not the case.  Given that activists tend to target underperforming companies, it is not unusual for boards at those companies already to be thinking about succession planning and seeking to strike a new direction for the company by the time the activist arrives.  We have seen circumstances where companies have successfully accelerated their succession planning, announcing a new CEO, and depriving an activist of a meaningful campaign platform.

Even companies that prevail in a proxy contest targeting their CEO must keep succession planning front of mind.  As an alternative to targeting a CEO directly, an activist may build a campaign around the claim that the board has not sufficiently planned for succession.  This line of attack is essentially a governance criticism of the board.  In reviewing board composition, boards might consider the succession planning experience of existing and prospective board members.

Some key themes to watch in 2025 include:

The Return of M&A Theses

In the past, a large portion of shareholder activism was oriented wholly or partially towards M&A and other transactional-focused themes.  Driving operational change at a company can be challenging for activists, and often does not match the timeframe that an activist may have for their investment. The promise of a premium remains a highly attractive way for activists to drive returns for their funds.  Over the last few years, however, the regulatory and macroeconomic environment limited activists’ ability to credibly push for full-company sales or strategic carve-outs.

To the extent that regulatory and market conditions become more favorable for M&A in 2025, activists may once again increase their focus on event-driven M&A outcomes.  Activists who are dissatisfied with a company’s perceived shortcomings in implementing previously demanded operational theses—or who are simply disappointed in a company’s valuation—may demand that a company go private, sell to a strategic buyer or divest parts of the company.  Companies may face challenges, however, with pursuing sales at inopportune times, and the activist may have already traded out of the stock upon the announcement of a failed sales process, leaving the other shareholders stuck with the negative results.

When pressuring companies to pursue a sale, activists may encourage, or force the company into a settlement, to create a committee tasked with exploring ”strategic alternatives” (often code for a potential sale), with one or more activist-nominated directors on the committee.  While these committees may make sense in particular situations, the decision whether to sell or break up the company, or even divest a division, should be a full-board decision, not simply delegated to a committee.  Where companies agree to form such committees, the committee charter should maintain the full board’s ultimate decision-making responsibility.

An Increasing Interest in Break-Ups

In 2025, we should expect to see activists arguing that break-ups of certain companies may result in trading valuations well in excess of the pre-split combined company.  Although break-up theses are not new to activism, they have taken on a new flavor, putting pressure on companies to separate not based merely on shedding underperforming divisions, but instead on trying to capitalize on trading multiples arbitrage.  For example, activists may call for a spinoff or other divestiture transaction specifically to highlight the value of one or more pieces of the company.  Companies that have businesses in multiple industries—or even in multiple countries where there are limited cross-border synergies—should lean into explaining the value of keeping these businesses integrated or be prepared to explore separation alternatives.

Potential Asymmetric and Diminished Transparency with New SEC Guidance

In February 2025, the SEC Staff issued a new Compliance and Disclosure Interpretation (C&DI) and revised an existing C&DI, providing guidance on the types of shareholder engagement that can lead to loss of Schedule 13G eligibility for institutional investors.  The new C&DI potentially expands the types of engagement that could be deemed to have the “purpose or effect of changing or influencing control.”  The guidance makes clear that Schedule 13G may be unavailable to a shareholder who, for example, recommends that a company remove its staggered board, eliminate its poison pill, or undertake a particular ESG-related action, if the shareholder explicitly or implicitly conditions its support of the company’s director nominees on the company’s adoption of that recommendation.  As it relates to proxy contests, the guidance could create an unintended asymmetry if institutional investors feel they are able to have more candid and detailed discussions about their interests and voting intentions with activist funds, but not with companies, for fear of losing Schedule 13G eligibility.  As governance teams at institutional investors evaluate their voting policies and engagement practices for compliance with this new guidance, companies may see changes in their proxy season and off-season engagement sessions.  Such changes may include potentially less transparency from institutional and other shareholders.  Nevertheless,  companies should remain front-footed in seeking out engagement opportunities, including as part of their established engagement programs, and have a clear agenda for those conversations.

Private Placeholder Nominations

In 2025, we have already seen activists privately submitting nomination notices at companies, sometimes naming individuals from the activist’s fund as director nominees, often without any intention of actually running for election.  These nomination notices serve as “placeholders” to provide the activist with option value to continue to press their agenda with the company which, by virtue of the nomination notice, is put into limbo in terms of how to prepare for the upcoming annual meeting.  Companies facing these situations may be forced to dual-track and prepare preliminary proxy statements—unnecessarily so, if the activist never actually sought to bear the expense and undertaking of a proxy contest and ends up withdrawing the nomination notice—further adding to the time, expense and distraction the company is already facing in addressing activist engagement.  Companies receiving a private nomination notice from an activist may consider whether it is advisable at some point to proactively disclose the notice rather than continue to engage privately.

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As activism continues to reach historic peaks, and companies are facing new players, strategies and tactics, advanced preparedness remains essential.  Companies today are better prepared than ever, and the prospect of shareholder activism is top of mind for today’s boards—one recent survey found that over 70% of boards had activism preparedness on the agenda in the past year.  The more directors can understand activism, its objectives, the strategies activists employ, and how to properly respond to activism, the more likely a company will be able to focus on its business and not be distracted by activist overtures.