Goldman's Mehrotra on the Changing Trends in Shareholder Activism

The video discusses the increasing risk of activism for companies, highlighting the need for preparedness. It explores how activists and industries face challenges, particularly in complex sectors. The impact of economic cycles on activism strategies is examined, with a focus on resilience. The globalization of activism is a key trend, with US activists targeting companies in Europe and Asia. Challenges include differing regulatory frameworks and cultural receptivity. The risks of divestitures and spinoffs are discussed, emphasizing the need for strategic consideration. Finally, the changing dynamics among shareholders, including the rise of passive investing, are explored.

What is a key reason for the increasing number of companies citing activism as a risk factor?

• There are fewer activists today than before.

• Companies are more prepared to handle activism.

• Activists are becoming less influential.

• Activism is now seen as a permanent aspect of business.

Why are activists focusing on larger, more diversified companies during economic volatility?

• Larger companies are easier to influence.

• They are perceived as more resilient to market changes.

• They have less complex operations.

• They offer more opportunities for quick profits.

What is one challenge activists face when targeting companies outside the US?

• Higher operational costs.

• Lack of global brands.

• Different regulatory frameworks.

• Limited market opportunities.

How have US-based activists adapted to the competitive market in the US?

• By focusing solely on US companies.

• By expanding their focus to global companies.

• By reducing their overall activities.

• By targeting only small businesses.

What is a potential risk of dismantling companies through spinoffs?

• Increased diversification.

• Loss of strategic assets.

• Higher dividend yields.

• Improved credit ratings.

How has the growth of passive investing affected shareholder activism?

• It has decreased the influence of active managers.

• It has made the asset management industry less competitive.

• It has reduced the number of activist campaigns.

• It has led to more active engagement by some managers.

What is a key strategy for companies to defend against activist challenges?

• Focusing solely on short-term gains.

• Developing a comprehensive and integrated response plan.

• Ignoring activist campaigns.

• Reacting spontaneously to activist demands.