AN FTI CONSULTING REPORT
The June 2024 Activism Vulnerability Report
The FTI Activism Vulnerability Screener is a proprietary model that measures the vulnerability of public companies in the U.S. and Canada to shareholder activism by collecting criteria relevant to activist investors and benchmarking to sector peers.
In this issue of the FTI Consulting Activism Vulnerability Report, we offer more insights, analysis and commentary on a relatively quiet start to the year, notwithstanding several high-profile activist campaigns involving companies like Macy’s, Crown Castle and Norfolk Southern. High valuations driven by strong U.S. equity markets last year, as shown by the S&P 500’s 26.3% total return, likely decreased the number of companies that activists found appealing.
ABOUT THE REPORT
Financial Institutions, Technology, Media & Telecommunications (“TMT”) and Retail & Consumer Products experienced heightened activist activity in 2023.
Recent Activism Highlights (March-May 2024)
Gildan Activewear — Activists successfully replaced a full slate of eight directors at Gildan, a Canadian apparel maker. A group of investors led by Browning West sought to bring back ousted CEO Glenn Chamandy, who was let go by Gildan’s board last December. ISS and Glass Lewis each backed the activists’ full slate of eight directors. On May 23, just five days before Gildan’s AGM, Gildan’s entire board resigned, effectively ceding their seats to the activists’ nominees.
The Financial Institutions sector remained the most active sector for activists in 1Q24, with 47 campaigns, an 24% year-over-year increase, representing 38% of total campaigns for the quarter.
Activity within TMT declined 4% year-over-year, but remained active with 22 total campaigns, representing 18% of total campaigns for the quarter.
The Real Estate sector, which our screener ranked as the industry most vulnerable to activism, experienced a number of small-cap campaigns, such as Blackwells Capital’s two campaigns against Ashford Hospitality Trust and Braemar, Nitor Capital’s against Tejon Ranch Co., and K&F Growth Capital against Bally’s Corporation.
As was the case in prior years, settlements continued to account for nearly all board seats gained, or 97% of all board seats gained thus far in 2024.
2024 OUTLOOK
percentage of the 40 total small-cap campaigns concluded thus far in 2024 that have resulted in at least partial victory for the activist.
88%
Campaign Total by Sector
Activism Vulnerability Screener Methodology
The Activism Vulnerability Screener is FTI Consulting’s proprietary model that measures the vulnerability of public companies in the U.S. and Canada to shareholder activism by collecting criteria relevant to activist investors and benchmarking to sector peers.
The criteria are sorted into four categories, scored on a scale of 0-25, (1) Governance, (2) Total Shareholder Return, (3) Balance Sheet and (4) Operating Performance, which are aggregated to a final Composite Vulnerability Score, scored on a scale of 0-100.
FTI Consulting’s Activism and M&A Solutions team determined these criteria through research of historical activist campaigns in order to locate themes and characteristics frequently targeted by activist investors.
Governance
Proxy voting standard
Board composition
Proxy access
Total Shareholder Return
Capital gains
Dividend and share repurchase policy
Relative valuation
Balance Sheet
Capital allocation
Leverage ratios
Liquidity
Operating Performance
Revenue and earnings growth
Profitability margins
Merger integration
Read the full insights from the June 2024 report
Key Contacts
Jason FranklSenior Managing Director
+1 202 312 9216 jason.frankl@fticonsulting.com
Brian KushnerSenior Managing Director
+1 214 397 1764 brian.kushner@fticonsulting.com
Ryan ChiangManaging Director
+1 240 968 8776 ryan.chiang@fticonsulting.com
Tom Kim
Managing Director
+1 917 545 9223
thomas.kim@fticonsulting.com
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2020
6.0%
2021
8.1%
2022
9.1%
2023
7.8%
2020
8.7%
2021
11.1%
2022
6.7%
2023
6.3%
2020
29.3%
2021
28.8%
2022
27.7%
2023
31.4%
Large Cap (>$10B)
Mid Cap ($2B-$10B)
Small Cap (<$2B)
ACTIVISM VULNERABILITY SCREENER RESULTS: 1Q24
Despite a quiet start to the year, there remains ample opportunity across many industries to constructively engage and create shareholder value.
The top three most vulnerable industries are Real Estate, Media & Publishing and Telecommunications, due to underperforming total shareholder returns (“TSR”), and weaker financial results.
We observed the greatest vulnerability increases in Life Sciences and Transportation.
Financial Institutions sector experienced the most significant improvement in multiple industries. The decrease in vulnerability has occurred even though interest rates remain high and commercial real estate borrowers face a wall of refinancing through the end of next year.
Construction, Banks and Investment Managers ranked as the least vulnerable.
Kurt Moeller
Managing Director
+1 214 397 1724 kurt.moeller@fticonsulting.com
Robert Kueppers
Senior Advisor
+1 202 312 9100 robert.kueppers@fticonsulting.com
Carl Jenkins
Managing Director
+1 303 689 8877 carl.jenkins@fticonsulting.com
Glenn Tyranski
Managing Director
+1 212 651 7120 glenn.tyranski@fticonsulting.com
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DOWNLOAD THE FULL REPORT
DOWNLOAD THE FULL REPORT
The first quarter of 2024 was fairly quiet for activist investors in terms of total campaigns, with 123 recorded, representing a 12% decrease vs. 1Q23. The most active sectors were Financial Institutions and Technology, Media & Telecommunications (“TMT”).
Q1 2024 IN REVIEW
Braemar Hotels & Resorts — Blackwells Capital launched a campaign to refresh Braemar’s board with four new directors. The AGM was postponed from May 15 until July 30, as Braemar contended that Blackwells had not complied with all legal requirements for its nominees to be validly considered. The two sides continue to litigate that claim pending the rescheduled AGM.
Crown Castle — Ted Miller, Crown Castle's founder and former CEO, launched a bid through his Boots Capital Management investment vehicle to return as executive chairman and nominated three other directors to join him. Miller called out the company’s recent agreements with Elliott Management, resulting in subsequent modifications to those agreements. The proxy advisors issued a split recommendation, yet shareholders elected all 12 Crown Castle nominees on May 22.
Financial Institutions
47
38
TMT
22
23
Industrials
16
19
Retail & Consumer Products
9
15
Real Estate
9
4
Energy, Power & Products
7
10
Healthcare & Life Sciences
6
16
Hospitality, Gaming & Leisure
6
5
Agriculture
1
2
Services
0
7
1Q24
1Q23
Campaign Total by Sector
An Ancora-led investor group nominated a majority slate of directors, looking to oust Norfolk’s CEO. Norfolk added two new directors and hired a new COO. At the AGM, shareholders voted for three of Ancora’s seven proposed directors.
This year we already have seen three separate forms of shareholder activism, with the same goal of gaining control. Read the full report to see detailed timeline graphics of each engagement.
Special Report: Flavors of Activism
Choice Hotels International Inc. vs. Wyndham Hotels and Resorts, Inc.
Ancora Advisors vs.
Norfolk Southern Corp.
Arkhouse Management and Brigade Capital vs. Macy’s Inc.
After Choice made an unsolicited takeover offer for Wyndham in October 2023, Choice’s share price substantially underperformed peers Hilton and Hyatt. When Choice withdrew its bid in March 2024, its share price rose meaningfully.
Macy’s directors seemed unwilling to engage in meaningful dialogue to negotiate a sale, prior to Arkhouse proposing a slate of directors. Though proxy contests often are not necessary to create change, the threat of one can expedite the process.
Recent Reports
April 2024 Report
December 2023 Report
September 2023 Report
June 2023 Report
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