An all-time record number of “deals” were announced in 2015 - falling just shy of the $5 trillion mark, at $4.7 trillion. A truly astonishing number. At least half of them were driven by ‘outside’ activist investors - but some of the biggest were triggered by boards themselves - looking to control their own destinies, without the help of Ackmans, Einhorns, Gardens, Icahns, Peltzes and others. Here are a few thoughts on the way 2016 will shape up, and the kinds of things that public companies need to watch out for:
Look for increasing pressure from the Justice Department to radically alter deal-terms and to stop a lot of deals altogether on anti-competitive grounds: This year, for example, we have seen the GE-Electrolux deal collapse, the FTC file suit to stop the Staples/Office Depot merger, and a half-dozen other large deals where companies will clearly have to make huge divestitures for their deals to go through.
Companies with done or pending deals will continue to come under tremendous scrutiny from activists - and will be under tremendous pressure for the deals to actually perform - over the very-short term.
As we noted in our last issue - “corporate governance” has become a huge business: Look for activists not just to continue to critique and micromanage the financial results but to “raise the bars” - and to raise the noise levels on corporate governance matters across the board - whether on social and environmental issues, “sustainability” - on “fair employment” issues and, we predict, on “too-high executive comp.”
We also predict that after many years where they were perceived as largely irrelevant, Annual Shareholder Meetings will increasingly turn into important forums for activist investors of every stripe - and that the noise levels and ‘old-time acting out’ at Meetings will increase noticeably in 2016, as it definitely did in 2015.
Look for most deals to continue to give rise to shareholder lawsuits over alleged disclosure issues - despite the recent pushback from the Delaware Chancery (see our Regulatory Notes section, and the Quote-of-the-Quarter for a bit of good news here.)
Look for the rich to keep getting richer in the deal-advisor world: Deal-tracker MergerMarket reported that Goldman Sachs, “the No. 1 financial advisor globally, advised on a record breaking $1.521 trillion worth of announced M&A transactions through 11 months…becoming the first advisor to join the $1.5 trillion club” and giving Goldie a 39% market share of global M&A through November. Additionally, they reported that Skadden, Arps, Slate, Meagher & Flom is “flying the flag for legal advisors, being the first law firm ever to advise on more than $900 billion worth of announced M&A transactions [and with the] Dow/DuPont deal, Skadden will surpass the trillion dollar mark!” - becoming the first law firm to do so.
One last and rather happy note for public companies on interesting financial developments in 2015: Investors moved just over a half-trillion dollars into “passively managed” index funds - adding $361.8 in new money and pulling $139.5 billion out of actively managed funds…. with Vanguard (which has basically board friendly voting policies) taking in $236 billion…or nearly half the loot.
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