niri 2015 activism – more than a passing phase sponsored session © 2015 rivel research group all...
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NIRI 2015
Activism – More than a Passing PhaseSponsored Session
A Buy-side/Corporate Perspective
© 2015 Rivel Research GroupAll rights reserved. No part of this publication may be reproduced in any form or by any means, without permission in writing from the copyright owner.
“What you don’t see can sink you”
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Activism – More than a Passing Phase
Company overview
Founded in 1991 – Art Rivel invented the IR Perception Study (circa 1972)
Focused exclusively on investment community research
We work with half of the S&P 100
Over 150 custom perception studies conducted each year
Intelligence Council – broader investment community research
Over 6,000 investment community interviews conducted each year
Over 4,000 IRO interviews conducted each year
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Activism – More than a Passing Phase
A comprehensive North American review
IRO studies in April 2014 and May 2015
Buy-side studies in March 2014 and May 2015
CEO/CFO study in December 2014
Objectives
Identify gaps between companies and the buy-side
Monitor key trends
What do IROs need to do? What does top management need to know?
Prepare for the unexpected – identify issues before they surface
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Expectations and Trends
Near-Term Expectations for Shareholder Activism (May 2015)
GLOBAL BUY-SIDE
68% BELIEVE ACTIVISM WILL INCREASE OVER NEXT
COUPLE YEARS
3% 9%4% 1%2%
32%19%
26%
64%78%
63%
North America(181)
Europe(110)
Asia-Pacific(63)
Increase
Little Change
Decrease
Uncertain
BY REGION
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Expectations and Trends
Sectors Expected to See the Most Activism (over Next Year or Two, May 2015) (Among Global Buy-side, n= 354)
20%
24%
30%
31%
34%
41%
43%
46%
55%
Utilities
Telecommunications
Materials
Healthcare
Financials
Consumer
Industrials
Technology
Energy
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Expectations and Trends
Inroads: Among North American Buy-side (May 2015):
51%12%
Have been contacted by an activist in the past year
Have proactively contacted an activist to voice displeasure about a stock they own
43% Report that an activist has successfully recruited their support at one time on a stock they owned (among those who have been contacted by an activist)
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February 2010 March 2014 February 2015
GLOBAL BUY-SIDE
71% BELIEVE SHAREHOLDER ACTIVISM
IS POSITIVE FORCE IN EQUITY MARKETS
Huge increase in receptivity to activism, a few second thoughts recently
Expectations and Trends
GLOBAL BUY-SIDE
84% BELIEVE SHAREHOLDER ACTIVISM
IS POSITIVE FORCE IN EQUITY MARKETS
US BUY-SIDE
43% BELIEVE SHAREHOLDER ACTIVISM
TYPICALLY IMPROVES ACOMPANY’S INVESTMENT APPEAL
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Why Do Investors Support Activists?
39%
20%
13%
8%
8%
5%
5%
Prompts mgmt accountability/a wake up call
Improves capital mgmt/shareholder value
Refocuses mgmt on strategy/business
Prompts Board accountability
Brings attention to issues
Better aligns board/mgmt with shareholders
Improved transparency
Most Important Positives of Shareholder Activism*(North American Buy-side, March 2014, n=181)
* Multiple responses accepted
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Why Do Investors Support Activists?
5%
7%
20%
38%
44%
High trading volume/volatility
Bad management in general
Excess cash on balance sheet
Stagnant stock/chronic undervaluation
Poor financial performance/missing targets
Telltale Signs of Being Vulnerable to an Activist (Top 5) (Unaided) (North American Buy-Side, March 2014, n=181)
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The Great Divide
Are Companies Complacent?
38% of 181 North American buy-siders believe CEOs underestimate the threat
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The Great Divide
Are Companies Complacent?
69% of 156 North American CEOs/CFOs said they were “not too concerned” with activism (December 2014)
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The Great Divide
April 2014 May 2015
1%2%2%
45%49%62%
33%33%
26%22%16%10%
Self-Reported Level ofIRO Concern
Perceived Level ofManagement Concern
Perceived Level ofManagement Concern
Very concerned
Somewhat concerned
Not too concerned
Uncertain/refused
Level of Concern with Activism: The IRO View (2014 to 2015)(Among North American IROs)
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How Companies Are Responding
34%
49%
11%6%
Well prepared
Somewhat prepared
Not well prepared
Uncertain
Activism Preparedness (Among North American IROs, May 2015, n=184)
39% Large-cap33% Mid-cap26% Small-cap
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How Companies Are Responding
33%
42%
62%
74%
31%
13%
9%
11%
36%
44%
29%
16%
Receptive to proxyaccess
Open to changingstrategy appropriately
Treat with open mind
Company will engageactivist
Positive posture Uncertain Negative Posture
Overall Posture Toward Activist Investors (Aided)(Among North American IROs, May 2015, n=179)
Company will ignoreactivist
Will treat as hostile
Will defend strategystrongly
Unreceptive to proxyaccess
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Takeaways
Institutional investors believe activists drive valuation
Institutional investors are willing to work with activists
Many do not believe companies are well prepared
Most CEOs and CFOs are not concerned
Most companies do not have a plan
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Activism – More than a Passing Phase
What you don’t see can sink you …
If you have any further questions, please email Brian at [email protected]