Activist investors push boards toward deals as campaigns stay elevated

Shareholder activism remained elevated for a third consecutive year in 2025, with campaigns increasingly focused on board composition and mergers and acquisitions, according to panelists speaking Tuesday at the Securities Regulation Institute.

David Katz, a partner at Wachtell, Lipton, Rosen & Katz and an adjunct professor at New York University School of Law, discussed recent activism trends during the "Surveying the M&A Landscape" panel, part of the second day of the Institute's three-day conference on Coronado Island.

"2025 was the third consecutive year of elevated activism volume," Katz said. "Board change demands led at 37%, followed by mergers and acquisitions at 35%, and then capital allocation at 31%, which was actually much higher than capital allocation activity in the preceding year."

Katz noted a growing emphasis by activists on pushing companies toward transactions, particularly M&A. "We really are seeing an uptick in activist M&A pushing for a transaction," he said, pointing to a recent Delaware decision involving an activist investor who initially advocated for a sale and later reversed course.

From a company perspective, Katz emphasized that early and consistent shareholder engagement is critical. "The bottom line is that it's absolutely essential to be talking to your shareholders regularly," he said. "You should not wait until you have an activist problem to engage with your shareholders. That's too late."

Boards, Katz added, should proactively evaluate company strategy through an activist's lens--considering capital allocation, restructuring opportunities, and potential divestitures or spin-offs before an activist raises those issues publicly.

"These conversations are far more productive when they happen in the boardroom first, rather than in response to an activist campaign," Katz said. "Otherwise, management and the board are left reacting--forced to explain to both directors and shareholders why a proposal is not a good strategy."

Companies are increasingly trying to prepare in advance, Katz said, by spending time with directors on potential activist scenarios, receiving briefings from investment bankers, and assembling a response team that could include proxy solicitors, public relations advisors, financial advisors and legal counsel.

Katz cautioned, however, against the reflexive creation of special committees to address activism. "One thing we sometimes see are so-called special committees that aren't really special committees," he said. "That can create the implication that some directors are more involved than others. An activist's goal is often to split the board--from management or from each other--and that approach can backfire."

He also stressed the importance of consistent messaging. "It's much better for shareholders to hear a continuing story than to hear a new or different story when an activist shows up," Katz said.

Activists, Katz observed, often enjoy a tactical advantage. "Activists can throw whatever they want against the wall and see what sticks with investors," he said, adding that companies that abruptly shift strategy in response risk signaling weakness.

Iliana Ongun, a partner at Milbank LLP in New York City, echoed Katz's concerns, particularly about emotional reactions to activist attacks. "You see this time and time again," Ongun said. "An activist sends a letter alleging fiduciary breaches or poor management. It feels good to hit back--but that's exactly what activists want."

Ongun emphasized the role of experienced advisors in maintaining discipline. "That's where outside counsel and internal legal teams can add real value--by picking apart the activist's strategy and refocusing on what's actually trying to be accomplished," she said.

Katz closed by underscoring the importance of thoughtful leadership in the face of activism. "The way I counsel CEOs is that you don't want to be reacting--you want to be responding," he said. "When you respond, you're thoughtful, less emotional, and you take all the relevant factors into account."