Activist investors to push for margins, profitability in first half of 2023

Heavy rain moves into northeast U.S. in Weehawken, New Jersey
A man walks with an umbrella along the Hudson river waterfront in front of the Manhattan skyline as heavy rain moved into the northeast U.S. in Weehawken, New Jersey, U.S. October 26, 2021. REUTERS/Mike Segar

Feb 16 (Reuters) - Companies that have been spending actively in pursuit of growth opportunities will be the chief targets of activist investors in the first half of the year, according to a report from data provider Insightia.

In an economic reality where capital is hard to come by and recession is a likelihood, activist investors will ask companies to focus more on margins and the quickest path to profitability, the report said.

"There will (also) be some cases where activists will push for buybacks and dividends," said Josh Black, editor-in-chief of Insightia, a brand of software company Diligent .

In the second half of 2023, as the U.S. Federal Reserve possibly eases off its hiking cycle and the market for mergers and acquisitions (M&A) improves, companies with significant drops in valuations will see more activists campaign for a sale, according to the report.

Several high-profile U.S. firms have lately been caught in the crosshairs of activist investors, who push for changes and wage proxy fights against management for board seats.

Reuters Graphics

Trian Fund's Nelson Peltz in January started a proxy fight against Walt Disney Co (DIS.N), but withdrew his bid for a board seat earlier this month after the media giant announced a restructuring program that addressed most of the fund's criticisms.

Earlier this week, payments and banking conglomerate FIS (FIS.N) unveiled plans to spin-off its merchant business following pressure to explore strategic options from activist investors D.E. Shaw Group and Jana Partners.

The report said Elliott Management took the top spot in 2022, as eight of the nine campaigns it publicly launched last year were either successful or partially successful, with one still ongoing.

The number of companies publicly subjected to new campaigns by activist investors worldwide hit 929 in 2022, a 6% increase from a year earlier.

That was driven by robust activity focused on capital allocation, board changes, and environmental and social demands, the report said.

Reuters Graphics
Reporting by Niket Nishant and Akash Sriram in Bengaluru; Editing by Devika Syamnath

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Akash reports on technology companies in the United States, electric vehicle companies, and the space industry. His reporting usually appears in the Autos & Transportation and Technology sections. He has a postgraduate degree in Conflict, Development, and Security from the University of Leeds. Akash's interests include music, football (soccer), and Formula 1.