10Minutes on hedge fund activism
To understand what's behind the rise in hedge fund activism, PwC has isolated six common company vulnerabilities that put a company at risk for an activist attack.
Shareholder activism is exploding: The number of activists is increasing, and their tactics and strategies are changing. Several hundred new activist hedge funds—on the aggressive end of the activism spectrum—have launched in the past decade, and their assets under management are surging.
We believe that companies that put themselves in an activist’s shoes will be most able to anticipate, prepare for, and respond to an activist campaign. So what should they know—and do?
Companies can take a critical look at their businesses as an activist would, looking hard for underperforming components. They can understand which activists might be interested in or attracted to the company and why. And they can better understand their shareholder base and have a tailored engagement plan.
If an activist investor knocks, companies can objectively consider the activist's ideas, not only to identify areas of consensus but also to be able to demonstrate to other investors that management and the board are aligned with long-term shareholder value.