Deal or No Deal?

Global mergers and acquisitions activity suffered its weakest first quarter in a decade as an abrupt banking crisis, stubborn inflation and continued interest rate hikes worsened stock prices and drove fears of a recession, depressing dealmaking. The value of mergers and acquisitions dropped 45% to $550.5 billion between January and March compared to the same period last year, the largest decline in the first quarter since 2001. 

In contrast, activist shareholders remain busy, launching a total of 135 campaigns in Q1, the highest first quarter total since 2019. So far, only 18 of those have escalated to a proxy fight, but with many annual meetings fast approaching, we expect several more to evolve into shareholder contests.

These trends in the capital markets were top of mind last month at the Tulane Corporate Law Institute, the annual gathering of leading lawyers, bankers, proxy solicitors and communications advisors focused on M&A and shareholder activism, including several from FGS. Among the highlights:

  • Foreshowing the brutal quarterly dealmaking data, JPMorgan Chase’s Global Head of M&A Anu Aiyengar declared “There’s a brick wall in front of M&A activity.”
  • Scott Barshay, Chair of the Corporate Department at Paul, Weiss, Rifkind, Wharton & Garrison, said the current regulatory regime led by Jonathan Kanter at the DOJ and Lina Khan at the FTC was having a major impact on the deal landscape and predicted the M&A market would start to rebound only at the end of 2023.
  • Sullivan & Cromwell’s Audra Cohen argued companies’ efforts to alter their bylaws amidst activist attacks often left them in complicated litigation, distracting executives and advisors from more effective activist defense tactics.
  • Interestingly, the SEC’s Associate Director of Corporation Finance, Ted Yu, told the panel the emergence of the universal proxy card has thus far not reduced the costs of running an activist campaign, despite predictions to the contrary by governance experts.