Activist Investors: How to Prepare Before They Engage Your Company

The scale of recent activity changes the planning assumption. Lazard counted 297 campaigns globally in 2025, a new high, and described 2025 as the third consecutive record year for volume. In the first half of 2026 its review analyses 184 new campaigns, up 20% on the same period a year earlier and 38% above the five-year first-half average. A company that treats activism as a remote tail risk is ignoring a trend that has persisted for three years.

Trackers count differently, and the difference matters when you compare numbers. Barclays recorded a record 255 campaigns in 2025, against Lazard's 297, reflecting differences in scope and definition. The direction is the same in both. Lazard's half-year series shows 147 campaigns in the first half of 2024, 150 in 2025 and 184 in 2026, so the latest step is the largest. Use trends from one tracker rather than mixing sources.

The activity is also global. Lazard reports that Japan reached a record 56 new campaigns in 2025 and that Asia-Pacific volume rose 25%, while European volume fell 19%, with M&A accounting for up to 50% of campaign objectives in Europe. For a board with a multinational shareholder register, the implication is that the next approach may come from an investor with experience in another jurisdiction and a template that has worked there.

There is a structural reason for the persistence. Capital markets have rewarded activist-driven change, institutional investors appear more willing to back dissident nominees than a decade ago, and a campaign costs little relative to the capital it targets. A cycle of corporate restructuring, including separations and sales, also gives activists a steady supply of ready-made arguments. These are our judgements rather than findings in the data above, but they explain why we expect a high plateau to persist rather than reverse.

Boards should also separate the number of campaigns from their consequences. A rising count does not mean every campaign succeeds: the Conference Board found that none of the voted contests in the first ten months of 2025 resulted in an outright activist victory. Many gains come through negotiation, private pressure and the threat of a contest. The practical reading is that the threat is real and growing, while a fully contested vote remains difficult for the activist, which gives a well-prepared board time and leverage if it uses them.

What to do: give the board a one-page activism dashboard each half year, using one tracker consistently, showing campaign volume by region and objective, notable targets in your sector, and any change in your own register. The purpose is to keep the topic on the agenda without drama.

North American activity rose 28% in 2025, to 173 campaigns from 135 in 2024, according to Lazard. The first half of 2026 set a further record of 94 campaigns, up 19% year on year and 36% above the historical average. The earlier half-year figures show the build: 66 campaigns in the first half of 2024, and 70 in the United States and seven in Canada in the first half of 2025.

The sector mix is broadening. Globally Industrials (24%) and Technology (19%) remained the main targets in 2025, but Lazard notes that Real Estate and Financial Institutions campaigns in North America reached all-time highs of 16% and 12% of the total. Sectors that historically felt insulated, such as property and financial services, should now assume they are visible to the same screens that identify industrial conglomerates and software businesses with weak margins.

The implication for an investor relations head is that being an unusual or complex company no longer provides cover. Activists have moved into sectors where asset values, balance-sheet structure or regulation make the case harder to read from outside, which raises the premium on a clear company narrative. If you cannot explain your portfolio, margins and capital returns simply, someone else will do it for you.

Canada deserves a separate word. Lazard's first-half 2024 review attributed a dip in North American activity to a slower pace in Canada, and the first-half 2025 count of seven Canadian campaigns against 70 in the United States shows how concentrated volume is south of the border. Canadian issuers should still take little comfort, because global activists operate across the border. Local counsel should map any differences in disclosure and nomination rules for each listing.

What to do: run an outside-in screen of your own company as an activist would, using public data on relative shareholder return, margin against peers, balance-sheet capacity and board composition. Assign the result to a named senior owner, share it with the board, and update it twice a year.

Lazard's 2025 review shows Board Change as the dominant objective, arising in 37% of campaigns, followed by M&A at 35%, above the five-year average of 29%, and capital allocation at 31%, against 19% in prior years. In the first half of 2026 capital allocation demands arose in 39% of campaigns, up from 23% historically, while M&A and Board Change accounted for 40% and 35% of campaigns respectively.

The pattern holds across time. Lazard's 2024 review had already recorded capital allocation demands in 29% of campaigns against a five-year average of 18%. These are not exotic requests. They are demands about the use of cash, the shape of the portfolio and the pursuit of a sale or separation, and they are the questions a well-prepared management team should be able to answer first.

Leadership is the sharpest edge. The Conference Board, with ESGAUGE, counted 16 CEO-targeting activist campaigns in 2022, 24 in 2023 and 21 in 2024, then a record 39 in the first ten months of 2025. Of 127 such campaigns recorded, 48 (37.8%) ended in a CEO change. A CEO who treats activism as a distraction should note that the personal stakes have been rising.

Activists increasingly present a single idea as several problems. A demand to sell a division is a portfolio argument, a capital allocation argument and, if resisted, a board argument at the same time. That is why the three objectives overlap in the data: their shares sum to more than the whole, because campaigns usually cite several. Management should therefore prepare integrated answers, with the CFO, strategy head and chair rehearsing how the three connect, rather than treating each demand as a separate workstream.

Europe shows the M&A pattern in its sharpest form. Lazard reports that M&A accounted for up to 50% of European campaign objectives in 2025, even as overall European volume fell by 19%. For a company listed in London or on the continent with a North American shareholder base, this implies that the activist most likely to appear is one pressing for a sale, merger or break-up, supported by a valuation argument. Directors should be ready to discuss strategic alternatives credibly, including the price at which a transaction would be acceptable.

What to do: for each of the three recurring demands, board composition, capital allocation and portfolio or sale, write down the company's current position, the evidence behind it and the best alternative an outsider might propose. Rehearse the answers with the board, so that the first conversation with an activist is not the first time directors hear the argument.

Since 1 September 2022 the SEC's universal proxy rules have let shareholders vote for any combination of company and dissident nominees on a single card. Sidley Austin's review of three years of experience, published through the Harvard Law School Forum on Corporate Governance, finds that activists have gained at least one seat in 48% of universal proxy elections, up from 39% before the rule, while the average number of dissident candidates elected has fallen from 1.1 to 0.9.

The same review shows the limits of the change. Activists have not won a single proxy contest for board control under the new rules, going 0-for-4, and shareholders have supported at least half of the dissident slate in only 24% of elections, down from 39%. The effect is to make one or two seats easier to win and control harder to win, which favours targeted campaigns over full takeovers of the board.

For management this alters the calculation. Because a single well-qualified dissident can win a seat on merit, boards can no longer rely on a slate-versus-slate vote that often favoured the incumbent. Independent directors need a visible record of contribution, and the company needs a credible answer to the question 'which of the activist's nominees would improve this board?' before the contest begins.

The rule also raises the value of preparation on the board's side. A universal card lets shareholders pick the best individuals, so a company that has refreshed its board recently, and can show that new directors have changed the agenda, holds a stronger hand than one defending long-tenured incumbents. Tenure is not a fault in itself, but unexplained tenure combined with weak returns is the pattern activists use most effectively. Boards should be able to explain, director by director, why each is right for the next three years.

What to do: have the nominating committee run an annual skills and tenure review against the company's strategy, and identify two or three candidates it would add if a vacancy arose. A board that has already considered its gaps is better placed to offer a constructive settlement than one that discovers them under pressure.

Activists do not choose targets at random. In our view, the triggers that screens commonly look for are persistent underperformance against peers, a conglomerate or complex structure that obscures value, surplus cash or under-used leverage, a long-tenured board and a recent strategy that the market has not rewarded. These are judgements on our part. The public evidence on objectives, set out above, is consistent with them.

The practical task is to turn the screen into a plan. If relative returns lag, explain why and show the evidence that the strategy is working. If a division is worth more outside the group, a credible management view of its future is better than an activist's. If cash is accumulating, a clear, quantified framework for investment, dividends and buybacks is the best protection. What cannot work is silence.

The Conference Board record of recent campaigns shows what outcomes look like when management has not got ahead of the issue. Elliott secured two of four board seats at Phillips 66, and Starboard added two directors at Autodesk. Settlements typically bring new directors, a review of strategy or capital returns, and a period of heightened scrutiny. Each of those could have been designed by the company on its own terms had it moved earlier.

Valuation gaps are not always real, and an honest analysis will say so. A discount to peers can reflect a different growth profile, cyclical exposure or accounting treatment. Boards that dismiss every gap are as exposed as those that accept every one. The test is whether the company can show evidence, with numbers, for its view. Where the evidence is thin, say so internally and set a plan to build it; where it is strong, publish it so investors do not have to rely on an activist's version.

A well-prepared company can turn this exercise into an advantage. The value-gap analysis is useful even if no activist ever appears: it produces a sharper strategy, a more defensible capital framework and a board paper that investors will credit. Activism, in that sense, imposes a discipline that good management might choose anyway. The difference is that choosing it early lets the company set the agenda and the timetable, instead of responding to someone else's.

What to do: commission a value-gap analysis that compares your valuation with a sum-of-the-parts view, compares returns on capital with peers, and shows cash and leverage capacity. Treat it as a board paper, not an IR exercise, and agree which gaps management will close, which it will explain and which it disputes.

The most useful pre-emptive step is rarely a poison pill or a legal opinion. It is a stronger relationship with the investors whose votes would decide a contest. Because universal proxy makes individual director quality visible, long-term holders will form a view of your board quickly. They do so better if they have heard directly from independent directors and understand the capital plan before an activist appears.

Disclosure rules now compress the timetable once an activist has built a position. The SEC's amendments to Schedule 13D shortened the deadline for initial filings from 10 days to five business days, and require amendments within two business days. In practice a stake and a stated intention can become public with little warning, and the company may have only days to form a response while the share price and the register react.

Plan the dialogue accordingly. Meet the top 20 holders, and the main proxy advisers, outside the proxy season, with a consistent message about strategy, capital allocation and board refreshment, and listen for criticism you have not heard. Where an activist later approaches, the board will know which holders are supportive, which are neutral and which have concerns, and can engage from knowledge rather than assumption.

Proxy advisers and index-fund stewardship teams are the other audience. Their policies on board composition, tenure, overboarding and capital return shape how large holders vote, and they publish them. Read those policies as an activist would, and note where your governance departs from them. A departure may be justified, but it should be a conscious and explained choice, not a surprise discovered when advisers assess a dissident slate.

Message discipline matters as much as the meetings. Investors compare what directors say with what management says and with what the filings show. Inconsistencies, such as a stated priority on returns alongside an acquisition programme with no return hurdle, are exactly what an activist quotes back. Agree a single capital allocation statement, test it with the audit and remuneration committees, and make sure every spokesperson can explain it in plain terms without notes.

What to do: build a holder map that records ownership, voting history, stated stewardship priorities and relationship owner for each top holder. Schedule engagement by independent directors, and track the questions investors raise so the board hears them in aggregate. Keep records of all contacts, because they will matter if a campaign begins.

When an activist surfaces, the first week sets the tone. Companies that have not agreed roles, advisers and messages tend to drift between dismissal and concession. A playbook, approved by the board in a calm period, specifies who speaks, who is informed, which advisers are retained, what is said to employees and investors, and under what conditions management meets the activist. It should be short and tested.

The playbook should distinguish types of approach. Some activists want a private conversation about a specific change and are open to a negotiated outcome. Others plan a public campaign from the outset. The Conference Board data show settlements at companies such as Phillips 66 and Autodesk alongside contests that went to a vote, and that none of the voted contests in the first ten months of 2025 resulted in an outright activist victory. The right response depends on the substance of the case, not the volume of the letter.

Whatever the approach, treat the first meeting as an opportunity to listen. The most expensive mistake is to dismiss a point that is correct and later concede it under pressure. Test every element of the activist's case against your own analysis, identify what you agree with, and be prepared to adopt it. A board that can say 'we are already doing this' with evidence is in a strong position; a board that has to say 'we will look at it' is not.

Finally, think about the end-state before the dispute starts. Campaigns often end in a negotiated outcome, such as new directors, a strategic review or a capital return, and the terms matter for years afterwards: standstill periods, committee seats, information rights and the way success is measured. Knowing in advance which concessions you would accept, and which would damage the company, gives negotiators room to move quickly and avoids a public fight over matters you could have conceded.

Communications beyond investors need a plan too. Employees, customers, lenders and regulators will read press coverage of a campaign, and uncertainty can affect retention and trading terms before any vote is held. Prepare short, factual statements for each audience, approved in advance, that explain the board's process without attacking the activist personally. The tone of the first fortnight tends to define how the rest of the dispute is perceived, and a measured tone costs nothing.

What to do: run a tabletop exercise each year using a realistic activist letter, with the CEO, CFO, general counsel, lead independent director and investor relations head. Review the timeline against the five-business-day disclosure window, test the holder map and refresh the playbook. Note that this is information to support planning and does not replace the advice of securities counsel or regulated advisers.

Karter McKinley helps boards and investor relations teams build the outside-in value-gap analysis, the capital allocation narrative and the holder engagement plan described here, and can support the response playbook and tabletop exercise. Where a matter involves regulated advice or contest tactics, we work alongside securities counsel and appropriately authorised advisers; nothing in this article is investment or legal advice.