YTD2016 Activism Overview

Transcription

1 YTD2016 Activism Overview Waheed Hassan, CFA Senior Managing Director Activist Defense Practise Copyright 2015 by Alliance Advisors, LLC. ALL RIGHTS RESERVED.

2 No. of Activist Campaigns Remain High Proxy Fights ( YTD 2016) # Fights Year* 2 Source: FactSet Shark Repellent. Data as of 6/21/2016. (*Based upon scheduled or anticipated meeting date)

3 Most Activist Campaigns Settle before the Vote Total Proxy Fights (Voted On + Withdrawn + Settled) # Fights YTD 2016 Year* Voted-on Settled Withdrawn 3 Source: FactSet Shark Repellent. Data as of 6/21/2016. (*Based upon scheduled or anticipated meeting date)

4 Management s Win-Rate Improved in Proxy Fight Winner (campaigns that went to shareholder vote) # Fights YTD 2016 Year* Management won Dissident won Split 4 Source: FactSet Shark Repellent. Data as of 6/21/2016. (*Based upon scheduled or anticipated meeting date) Only the proxy fights that made it to a meeting/shareholder vote are included

5 Activists Continue to Negotiate Successfully Dissident Success Rate (includes settlement) Proxy Fights YTD Success Rate (%) YTD 2016 Year* 5 Source: FactSet Shark Repellent. Data as of 6/21/2016. (*Based upon scheduled or anticipated meeting date)

6 Activists Tend to Seek Minority Representation Primary Campaign Type Board Control (Majority) vs. Board Representation (Minority) 100% 90% 80% Percentage of campaigns 70% 60% 50% 40% 30% 67% 70% 78% Minority Majority 20% 10% 33% 30% 22% 0% YTD Source: FactSet Shark Repellent. Data based upon meeting date between 1/1/2014 and 6/21/2016. Campaign Type includes Board Representation and Board Control.

7 Institutional Investors Support Activists Percentage of time any fund family voted on the opposition card % 80% 60% 40% 20% 0% % 60% 50% 40% 30% 20% 10% 0% Dimensional Fund Advisors T. Rowe Price Associates, Inc. Fidelity Management and Research Invesco Advisors Black Rock Fund Advisors Northern Trust Investments, Inc. The Vanguard Group, Inc. SSgA Funds Management, Inc. 7 Source: ISS Voting Analytics, Alliance Analytics Data based on N-PX filings: 2014 (period covered: 7/1/2013 6/30/2014), 2015 (period covered: 7/1/2014 6/30/2015 Proxy contests for companies in Russell 3000 only

8 ISS is Increasingly Supporting Management Proxy Fights where ISS issued recommendation % # Meetings % % 17 Management Activist YTD Source: ISS Governance Voting Analytics Data based upon meeting date between 1/1/2014 and 6/21/2016 Proxy contests for all indices in USA Includes Elect Directors (Opposition Slate) and Remove Existing Directors only

9 Increase in First Time/Occasional Activist Proxy Contests, 2014 YTD % First-time activist % 53 22% Activist with total number of campaigns between 2 and 5 Activist with total number of campaigns greater than 5 Since Jan 2014, 39% of activist campaigns were led by first time or occasional activists 9 Source: FactSet Shark Repellent. Data based upon meeting date between 1/1/2014 and 6/21/2016. Campaign Type includes Board Representation and Board Control.

10 Activists Focus on Small/Mid-Cap Companies Proxy Contests for Board Control/ Representation Top 10 Companies targeted by First-time Activists by Market Capitalization >$10B 3% $5-10B 3% Ticker Company $1-5B 16% UAL WYNN ALLY United Continental Holdings, Inc. Wynn Resorts, Limited Ally Financial Inc. <$500M 66% $0.5-1B 12% ALSN DST PBYI SIR Allison Transmission Holdings, Inc. DST Systems, Inc. Puma Biotechnology, Inc. Select Income REIT JOSB Depomed, Inc. GTE Gran Tierra Energy Inc. AHP Ashford Hospitality Prime, Inc. Source: FactSet Shark Repellent. Data based upon meeting date between 1/1/2014 and 6/21/2016. Campaign Type includes Board Representation and Board Control. 10 Footnote: Market capitalization data is missing for the company Cogentix Medical, Inc., Strategic Realty Trust, Inc. and TopTung Limited therefore these three companies are excluded in the chart.

11 Most Activist Campaigns tend to Focus On Manufacturing & Services Industries Target Company's Division Finance, Insurance, And Real Estate Manufacturing Services Wholesale Trade, Retail Trade Construction, Mining YTD Transportation, Communications, Electric, Gas, And Sanitary Services # Target Companies 11 Source: FactSet Shark Repellent. Data based upon meeting date between 1/1/2014 and 6/21/2016. Campaign Type includes Board Representation and Board Control.

12 Alliance Advisors Activist Risk Assessment Valuation Operational Issues Balance Sheet/Capital Allocation Corporate Governance Total Shareholder Return (TSR) Revenue Growth Leverage Governance profile Valuation multiple premium/ discount Operating Margin Level of cash vs. Enterprise Value Executive compensation Change in Analyst Estimates ROIC Acquisition and R&D spending Prior Proxy Advisory firm recommendation Earnings Surprise Relative Segment Performance Share buyback/dividend 12

13 An Intelligent Stock Surveillance Program +400 proxy solicitation campaigns helps build and maintain best-inclass institutional custodian database Custodian data is then mapped to each institutional investor Annual Shareholder Meeting Alliance identified the following activists prior to 13D filing Monitoring of institutional voting, allows accurate detection and identification of custodians used by activist investors, hedge funds and traditional institutional investors Alliance Advisors has visibility on the custodian where vote was cast (JP Morgan, etc.) Votes cast is matched to reported ownership (13F and 13D filings) Investors cast their votes 13

14 Our Experience* Issuer Representation (includes activist defense advisory) Activist Representation (Target Companies) MORGANS HOTEL GROUP 14 * Select activist situations only.