Sidley Austin Tops Big Law Defense on Activist Investor Contests

Sidley Austin LLP has once again taken an early lead as the firm that navigated the most shareholder activism matters this year, including a much-watched proxy contest at biopharmaceutical company Alkermes plc.

Sidley helped companies with 32 activist campaigns in the first half of 2023, up from 30 at the midpoint of last year, according to new Bloomberg data. Total shareholder stakes in Sidley’s matters were valued at $2.6 billion. The figure represents the value of shares owned by activist investors involved in campaigns.

In second place was Vinson & Elkins LLP with 30 engagements and total shareholder stakes at $1.2 billion, according to Bloomberg data ranking the firms by the number of engagements. Latham & Watkins LLP was in third place with 19 engagements and total stakes at $4.7 billion.

Sidley advised Alkermes over its proxy contest against Sarissa Capital. That proxy contest made headlines when the head of Sarissa left his seat at the company’s collaborator, Biogen Inc., to pursue three director seats at Alkermes and nominated his romantic partner to fill his space at Biogen. Alkermes beat back Sarisssa Capital’s efforts to secure director seats at the company’s annual meeting in late June.

Kai Liekefett, a Sidley partner who co-chairs the firm’s shareholder activism and corporate defense practice, said the activism space wasn’t as busy as he expected it to be this proxy season.

“I would have told you this is going to be a proxy season for the record books, and it was not,” he said.

There were 417 new activist campaigns in the first half of 2023 overall, versus 332 campaigns in the first half of 2022, a 26% increase, according to the Bloomberg data. The value of activist stakes was flat at $44.5 billion, however.

But Liekefett said he had been expecting even more activity this year.

There are a few reasons shareholder activism may have fallen short of expectations, Liekefett said, pointing to the universal proxy card rules that came into effect in September. The new rules from the Securities and Exchange Commission changed the dynamic between companies and activists, leading to many situations where companies were more willing to reach settlements and avoid proxy fights at annual meetings, he said.

The SEC now requires companies to put candidates supported by shareholders and management on the same ballot in contested board elections. This means investors who are voting by proxy can pick from a broader range of candidates.

Liekefett also said a “crucial” element that overshadowed proxy season was the financial volatility earlier this year, which convinced a lot of activists to play it safe and not go forward with a proxy fight with a potential recession looming.

Sidley also advised pet food company Freshpet Inc. this year against Jana Partners, which nominated four directors to the company’s board. Jana filed a lawsuit against Freshpet and the board of directors in the Delaware Chancery Court after the company moved its annual meeting from its usual fall date to July. Freshpet moved its meeting date back to the fall soon after. Jana also accused the company of trying to reduce the number of directors up for election, which the company denied.

Sidley took on another matter at department store chain Nordstrom Inc. where activist investor Ryan Cohen, the chairman of GameStop Corp and founder of online pet supplies retailer Chewy Inc., nominated two board candidates before ultimately withdrawing.

Vinson & Elkins Gains

V&E is closer to passing Sidley on engagements than it was this time last year. V&E only had 17 matters for the first half of 2022, compared to Sidley’s 30.

V&E’s 30 engagements in 2023 included work helping banks AmeriServ Financial Inc. and First Foundation Inc. with activist investor Driver Management Co., which tried to get its own candidates on the companies’ boards over concerns about shareholder value.

Driver’s candidate for First Foundation’s board lost at the company’s annual meeting in June. The shareholder’s candidates for AmeriServ’s board never made the proxy ballot for the company’s annual meeting in May after a federal judge let the vote proceed without them earlier that month. Driver sued AmeriServ over the company’s decision to keep the investor’s candidates off the ballot.

V&E also advised gaming headphone maker Turtle Beach Corp. on the company’s fight with investor Donerail Group over how to best maximize value for shareholders. The company in May announced it appointed Donerail founder William Wyatt to its board and created a value enhancement committee.

Activists have been focusing more on unlocking shareholder value than on getting a company sold, said Patrick Gadson, a co-head of V&E’s shareholder activism practice.

“You can make certain changes that you believe would make a target company a more appetizing sale candidate when the M&A market sort of returns in a more robust way,” Gadson said of activists.

Latham’s Rise

Latham secured a signficant chunk of the activist stakes value. The firm’s $4.7 billion in total activist stakes was the second biggest after Slaughter and May, which had $5.0 billion.

Latham only had $1.1 billion in total shareholder stakes by this time last year. Its dozen engagements in the first half of 2022 put it at No. 4, behind Wachtell, Lipton, Rosen & Katz. Wachtell now holds the fourth spot with 13 engagements, six fewer than Latham’s 19.

Latham this year has advised 7-Eleven owner Seven & i Holdings Co. as it battles ValueAct Capital Management LP over the activist fund’s drive to boost the company’s valuation. ValueAct sought to oust Seven & i CEO Ryuichi Isaka and put its own candidates on the company’s board. But the fund failed at Seven & i’s annual meeting in May.

The law firm in 2023 also has counseled biotechnology supplier Abcam PLC in a fight with founder Jonathan Milner, who has pushed to remove some of its board members over company performance concerns and make himself executive chairman. Milner announced a pause in his campaign in June after Abcam said it was pursuing a strategic review.

Joshua Dubofsky, a global co-chair of Latham’s shareholder activism and takeover defense practice, said he expects activists this year to continue to focus on improving companies’ operations, as mergers and acquisitions activity has decreased.

“They’re going to be very vulnerable if they are not measuring well on” total shareholder return compared to their peers, Dubofsky said.

Activist Advice

Olshan Frome Wolosky LLP is once again the top choice for activists waging campaigns against companies. The firm had 89 engagements, with total stakes valued at $8.1 billion so far this year, according to Bloomberg data.

Last year the firm secured 147 engagements in total with stakes valued at $19.4 billion, Bloomberg data shows.

The firm’s work this year included advising Starboard Value LP on an agreement with electronics company Roger’s Corp. Rogers announced in February that it appointed two new directors to its board after the settlement with the activist investor.

Olshan also advised Elliott Investment Management on its campaign at Salesforce Inc, ending in a March agreement where Elliott decided not to further pursue its director nominations. A joint press release said Elliott dropped its efforts in light of the company’s financial results and other factors.

The price of a proxy contest has gone up for activists this year, said Meagan Reda, a partner at Olshan focusing on shareholder activism and proxy contests. She said expenses have risen after companies amended their bylaws in ways that made disclosure requirements for activist investors much more onerous.

Reda also echoed the sentiment that the universal proxy card did not usher in a significant rise in activist activity as many predicted last year.

Overall, she said “there are fewer campaigns that have gone to an actual fight this year, and more have settled.”