00:00Billionaire activist investor Bill Ackman trying to shake up the music industry with a bold $65 billion proposal to revalue
00:06Universal Music Group.
00:08Both major shareholders skeptical and the deal far from certain.
00:10It's raising questions about how activists are evolving in today's uncertain market.
00:15Here with some perspective on activism is Darren Novak, Global Co-Head of Shareholder Engagement and M&A Capital Markets
00:21at J.P. Morgan.
00:22Darren, thanks for joining us.
00:24And you are probably insanely busy because it has been such a busy first quarter.
00:29110 campaigns, I believe, is what the U.S. Bloomberg data suggests that we saw.
00:34Despite macro risk, despite AI shakeups, that didn't stop activists from launching new campaigns.
00:40Why has it been such a busy period?
00:42It has been tremendously busy.
00:44And it was really busy in 2025 where there was a lot of volatility then as well.
00:49And really the activists are opportunistic, but they're fundamentally looking for great companies to generate a lot of cash that
00:55are undervalued.
00:56And then there is some sort of catalyst that can occur, and typically M&A.
01:00So when you had a very robust M&A environment in 2025, continuing into the first quarter this year, it
01:07provides activists a tremendous amount of opportunity.
01:09And that's in the U.S., that is in Europe, that's in AIPAC and Japan in particular.
01:16Last year, the amount of activism was, in fact, up 32 percent in terms of public campaigns.
01:21And Japan was up 91 percent.
01:24And Europe continued to pace.
01:26And the first quarter this year, we're just seeing it continue.
01:29Do you have a lot more opportunity when there's this kind of volatility?
01:33Absolutely.
01:34The activists are looking for, again, those great companies where there's undervaluation.
01:38And what we're seeing with boardrooms right now at a lot of these companies that are experiencing the undervaluation is
01:45a difference in tone.
01:46It's a frustration that here we go again.
01:48We've got a great company.
01:50The fundamentals are strong.
01:51Yes, there are complications, but we can't get our valuation up.
01:55And then you have these long-term shareholders that are also feeling the same sort of frustration.
01:59And so boards, management teams are trying to get ahead of it and, in part, some of the reason why
02:04you see such incredible M&A activity.
02:07So, to your point, there's been a lot of M&A activity.
02:10It was a record first quarter in 2026, which I also think surprised a lot of people.
02:14But noticeably absent was private equity-led M&A.
02:18It was a lot of corporate M&A.
02:19What difference does it make for that to be less of a route?
02:22If private equity isn't as involved in the deal-making environment this time around?
02:26Well, certainly the way that activists are looking at opportunities, often private equity interest is core to it.
02:33But when you have such tremendous strategic interest, that's even better for the activists.
02:38It's often they can provide a higher valuation.
02:41And when you're seeing, especially, most activism occurs in that $1 to $10 billion market cap space.
02:45And it's true in the U.S., it's true in Europe, it's true in AIPAC, and it's true now for
02:49many, many years.
02:50It's because many of these companies aren't receiving the benefits of scale.
02:55And so that, in part, is what the market is taking advantage of and why these companies are very susceptible
03:01to potential activist interest.
03:03Are boards more accepting of activist discussions than they have been in the past or less?
03:11From my perspective, they are more accepting of constructive activist discussions.
03:16Now, the activists are coming from outside in.
03:18They don't have the benefit of the complexity that companies get to see and boards get to see, in particular,
03:24where there can be impediments to certain types of transactions, certain sort of events that the activists are looking for.
03:30But if the activist is coming with a well-conceived thesis, then boards are increasingly willing to appropriately engage and
03:39see if there is some sort of path or not.
03:42You know, fundamentally, companies agree that we're undervalued.
03:45Activists agree that we're undervalued.
03:47But what is the path to, in fact, unlock that undervaluation?
03:50And that's where there could be a difference.
03:52I just wonder what best practices are.
03:53You know, if you're doing your MBA at Harvard Business School, what does the professor tell you how to deal
03:59with activists when you become a board member someday?
04:02You definitely need to engage.
04:04In part, it's because your institutional shareholders are expecting you to engage.
04:09For many of these big brand-name activists, many shareholders believe that these are smart investors.
04:16And so you should at least have the discussion with the activists.
04:19You may ultimately have a difference of opinion, but these campaigns are one and lots not because the activist's right
04:26or the company's right.
04:27It really is what are your shareholders, in fact, thinking more broadly.
04:31It's often, as we say, you have to win the hearts and minds of all of your shareholders.
04:35What difference does it make, though, that it seems, anecdotally, I'd imagine that the data would back this up, that
04:40we're seeing a lot of either first-time activists or non-activists using activist-like techniques.
04:45T. Rowe Price, for example, I think, had fought back against a transaction that happened last year.
04:52New ones like Palliser, Irenic, that's in Snap.
04:55What difference is that making to have these first-timers come around?
04:58Well, it depends on who the first-time activist is.
05:02So these funds that have been started by people who worked at the large activist funds, they're very, very sophisticated.
05:10They believe, though, at times that they're still at their old fund and therefore expect the same sort of level
05:16of engagement and so forth, the same level of traction with other investors.
05:20And that isn't necessarily the case in some of these situations.
05:23And so that can make it a little bit more complicated for a proper constructive discussion.
05:28You have other first-time activists that really have no activist experience, and activism is a hard game.
05:34It's a very difficult process to go through successfully.
05:38And they think just writing a public letter can actually be successful.
05:42And that isn't necessarily the case.
05:44It really requires some proper engagement with companies, with shareholders, to get to a path that, in fact, works.
05:51Or it doesn't work if the company ultimately believes that that isn't a correct path.
05:55Is there a benefit to waging a takeover battle with a company that you realize you're not going to be
06:02able to take over?
06:03I just saw yesterday the story of Bill Ackman, and we were talking about it earlier, looking to take over
06:10UMG, even though it's not clear that Vincent Bellori and Vivendi are on board with that.
06:15And I'm not asking you to comment on that specific situation, but is there a reason that you would do
06:19that?
06:19Yes, and there are more funds thinking about it.
06:23Now, some of the funds are thinking about it from a pure economic perspective.
06:26They want more permanent capital.
06:28But the strategic part is also critically important, especially outside of the U.S., where you have a different dynamic
06:36in terms of how companies think about strategic alternatives.
06:39Just announcing a strategic alternative in Europe and Japan isn't necessarily a great sign.
06:44It can actually signal some problem.
06:47And so it can be very frustrating for U.S.-based activists, and they go in and they say, hey, you
06:52should do a strategic alternatives review.
06:54And the company says, no, we're a public company.
06:57Someone wants to make an offer, go ahead.
07:00And so you're seeing these funds making the offers and then putting them into play.
07:04Now, there haven't been a lot of them, but this is a newer technique.
07:07And I think many of them are thinking about this as a technique to push companies into play.
07:11So just a publicity play then?
07:13Part publicity, but I think fundamentally many of these funds, they have private equity backgrounds.
07:18They are doing the same sort of homework that private equity is doing.
07:21And at times they could be very much willing to own the company, but no problem if someone else actually
07:28comes in at a higher price.
07:29Or they bid the shares up, right?
07:31Exactly.
07:31If anyone who is famous, has a huge following, has been successful in the past, says, I want to take
07:36over this company, then maybe other investors say, I better buy it first.
07:39Absolutely.
07:40And that's why this environment is constantly changing.
07:42The fundamentals of what activists are looking for have remained the same.
07:45But the techniques that they use are constantly changing.
07:48And for companies, which, of course, that's who we advise, we need to be prepared for that.
07:53It can come in a variety of shapes.
07:55It's not just the way that it's been done the last five years.
07:58There could be newer asks.
08:00We're seeing right now some activists coming in and saying, listen, great company, but there's a problem.
08:05Here are some of the reasons for the problem.
08:07And not giving any solution, even though clearly they've done a ton of homework, and basically saying, just put us
08:12on the board and we'll work with you to come to the solution.
08:15And that's a very hard thing for a company to, in fact, engage with.
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