The Activist Agenda

As M&A activity fluctuates, one constant is the presence of activists, driving companies to put themselves up for sale or break themselves up, pushing for better deal terms or blocking deals where they feel that the terms are not acceptable.

While activism in 2025 did not match the highs of 2024, it is by no means going away. Activists continue to screen companies to look for opportunities that they feel companies should be exploring or improvements they should be making. It is not just traditional activists driving change – we are also seeing more "one off"/"first timer" activists who may focus on a specific issue in a specific company or sector, or on a specific transaction in which they have an interest. And it is important to remember that while some campaigns become public, many more are played out in private, so what we see is just the tip of the iceberg. 

How do shareholders influence M&A?

1. Push for companies to break themselves up

We have seen a move away from the trend for conglomerates, and instead are seeing more calls for companies to break themselves up so that the separated businesses can focus on what they are good at. In some cases, a goal may be to capture the higher valuations or trading multiples that could apply to one or more of those businesses on a standalone basis. For example, Ubisoft and Worldline faced a break-up/divestiture push in France recently, although in Australia AGL provided a recent example of an activist lobbying successfully against a proposed break up.

2. Push for companies to put themselves up for sale

By no means a new trend, but activists will (privately and sometimes publicly) call for companies that are seen as not delivering sufficient value or success (in particular compared to their peers) to put themselves up for sale or dispose of underperforming assets or lines of business.

3. Seek to get an offer made, or an improved price on a public deal

Shareholders may choose to leverage their stake in a company to secure a bid for the company or a higher price on an existing offer. They may even look to make an offer themselves, as we saw on the hostile offer by Regent for Inspired in the UK. 

4. Block a deal where the shareholders don't think that the price or strategic rationale is good enough

Shareholders may decide to block a deal if they think it simply isn't good/strategic enough – even if it is recommended by the target board. In the UK, Cicor Technologies' bid for TT Electronics was voted down by shareholders, led by DBAY, which increased its stake to 24.5% ahead of the vote. 

5. Change the board

Where shareholders disagree with an approach the board is taking, they may seek to change some or all members of the board of directors to ensure a change in strategy. Generally, board change campaigns are less of a stand-alone goal than a way to effect other changes regarding M&A or other strategy initiatives or other matters such as capital allocation or corporate governance.

6. Advocate for broader regulatory change

Shareholders can lobby governments and regulators to intervene in approvals required for transactions or to make more wholesale changes to how transactions proceed in the market. Current proposed changes to the Australian listing rules seeking to impose more onerous shareholder approval requirements for companies issuing shares as part of control transactions (which would bring the ASX more in line with international practice) arose primarily because of strident criticism from James Hardie's Australian shareholder base regarding its scrip merger with US-based Azek (and move to a primary NYSE listing).

7. Seek to influence types of deals

In an environment, such as South Africa, where activist shareholders are increasingly pushing for greater transparency around climate risk disclosures, to align with global ESG standards, and reduced investments in fossil fuels, the types of deals which are pursued by the directors of a company may be impacted. 

What can companies do to prepare?

• Monitor their share register for activists coming onto it
• Monitor third-party comments and criticisms regarding the company's performance and management
• Keep up a dialogue with their shareholders to get their perspective on the company's strategy
• If an activist comes onto their register, is publicly identified through regulatory filings or otherwise, or reaches out to other investors or management, listen to their suggestions – they will have done their homework 
• Do due diligence on the activist – understanding their motivation and previous campaigns will help a board anticipate their asks and likely approach and the basis on which some accommodation might be negotiated if desired 

How can parties win support for a deal that is facing opposition?

Securing irrevocable commitments to support a deal ahead of launch can send a strong signal to the market that the deal will go through (although in some jurisdictions there can be regulatory issues with receiving such commitments that need to be navigated).

Where there is a key shareholder whose support could mean the deal is successful, a bidder may elect to offer a form of consideration that is attractive to that shareholder, such as an unlisted securities alternative (known as stub equity). It will be important to ensure that any such offer is compliant with any legal or regulatory restrictions (such as a requirement to treat all shareholders equally) but this can be an effective tool in securing support for a transaction. 

While we do sometimes see deals that are recommended by a company being rejected by its shareholders, securing a board recommendation is enormously valuable in helping a deal go through. In deciding whether to recommend a deal, the target may (and in some jurisdictions, is required to) not just look at price but also at what other commitments it might want to secure from the bidder, for example in relation to the running of the target business going forward, investment in the business or the protection of its employees.

Being proactive and creative on shareholder engagement, and monitoring shareholder and market views (and remaining a little paranoid), is also important. Shaky approval positions can sometimes be managed through extending timing for shareholder votes, giving bidders time to increase voter participation or potentially recut the transaction, or the approvals being sought, if required. 

Where the target board is not willing to engage with a bidder or recommend a deal, we also continue to see bidders take the bid directly to shareholders. 

Outlook for 2026

It will be interesting to see what impact the proposed changes to stewardship in some of the largest asset managers will have – it may well see them being more active in scrutinising the governance and direction of companies but having less dialogue with those companies. 

With continuing uncertainty around what geopolitics will bring, what is clear is that activists will continue to look for companies whose strategy they think should be different or better or which they see as undervalued. While certain sectors may see an increase in activism in a particular period – for example investment trusts in the UK are seeing intense activity at the moment – any company, in any sector and of any size may become the focus of an activist and should be prepared for that. 

Both activists and other investors, and company management, should ensure they understand what tools are available both to themselves and to other parties and utilise them appropriately. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.