Sidley Leads Big Law Pack in Fighting Activist Investor Bids

Sidley Austin LLP has secured the lead as the firm that handled the most shareholder activism matters last year, including campaigns against Hasbro Inc. and US Foods Holding Corp.

Sidley assisted companies with 48 activist campaigns in 2022, up from 37 in 2021, according to new Bloomberg data. Total shareholder stakes in the firm’s matters were valued at $11 billion as of the end of the year, more than doubling the $5.2 billion the firm handled for all of 2021. The figure represents the values of shares owned by activist investors involved in campaigns.

“We’re on the brink of a record year for shareholder activism. It’s been off the charts,” said Kai Liekefett, a Sidley partner who co-chairs the firm’s shareholder activism and corporate defense practice.

Vinson & Elkins LLP came in second for 2022 when ranked by engagements, and Wachtell, Lipton, Rosen & Katz was third, in line with the results from the first half of the year.

In all, there were 631 new activist campaigns in 2022, a 7.3% bump from the 588 campaigns in 2021, according to the Bloomberg data. The total stakes dropped however, at $68.4 billion in 2022, down from $81.4 billion in 2021, a 15.9% decrease.

Sidley’s Liekefett listed a medley of reasons for the increased activity. Activists were busy raising capital during the pandemic and the 2022 drop in share prices has made it easier for them to accumulate significant stakes in companies, he said.

Universal proxy card rules that came into effect in September also created more work for law firms. The Securities and Exchange Commission now requires companies to put candidates supported by shareholders and management on the same ballot in contested board elections. The change allows investors who are voting by proxy the ability to pick among a broader range of candidates.

“It’s uncharted territory for everyone,” Liekefett said.

Sidley advised US Foods Holding Corp. last year in what Liekefett called “one of the most civilized proxy fights” he’s experienced. The campaign brought by Sachem Head Capital Management ended in a settlement that allowed activist investors to secure three board seats as the company’s CEO stepped down.

The firm helped The New York Times in a matter against ValueAct, an activist investor that said in August that it wanted to further push subscriber-only bundles.

Sidley also took on activist investor Alta Fox Capital Management LLC after the hedge fund campaigned for toy and entertainment giant Hasbro to spin off its Wizards of the Coast playing card and digital gaming business. Hasbro investors rejected the hedge fund’s board candidate and reelected the company’s 13 directors.

Source: Bloomberg Intelligence

‘A Steady Clip’

Vinson & Elkins was No. 2 with 38 engagements last year after leading the pack in 2021 with the same tally as 2022. The firm worked for cloud computing company Blackbaud Inc. and Republic First Bancorp Inc. last year, according to Bloomberg data.

V&E defended Philadelphia-based Republic First Bancorp against activist investors Driver Management Co. LLC and New Jersey Democratic power broker George Norcross over concerns about financial performance and leadership at the company’s subsidiary, Republic Bank. The campaigns played out as a board split on future strategy led to a court battle and resignations.

Norcross, an insurance executive who holds no public office, sought to remove the bank’s CEO and chairman, Vernon Hill, who left last August. Norcross also fought to expel Hill’s successor, Harry Madonna, who resigned as interim CEO in December. Driver successfully pushed to put former Texas Capital Bancshares Inc. CFO Peter Bartholow on the bank’s board.

V&E also advised Blackbaud on a campaign launched by top shareholder Clearlake Capital Group LP last October to review corporate strategy and increase shareholder value as the private equity firm considered boosting its 18% stake in the company.

Blackbaud soon after put in place a poison pill with special shareholder rights intended to deter a hostile takeover.

The Republic Bank and Blackbaud matters are among several campaigns that have kept V&E engaged after the first half of the year, the typical busy period when companies prepare for their annual meetings.

“There’s been no quote-unquote off-season for us,” said Lawrence Elbaum, a co-head of V&E’s shareholder activism practice. “We’ve been working at a steady clip nonstop.”

High Stakes

Wachtell secured 29 engagements last year, putting the firm in third place. The shareholder stakes was valued at $14.7 billion, the highest amount for any firm in 2022.

Latham & Watkins was in fourth place with 23 engagements, while Skadden Arps Slate Meagher & Flom and Goodwin Procter each had 15 engagements, the data shows.

Wachtell helped Pinterest reach a deal with investment firm Elliott Investment Management LP in December after the activist sought to shake up its operations. Pinterest appointed Marc Steinberg from Elliott to its board in what it described as a “one-of-a-kind agreement.”

Drug distributor Cardinal Health Inc. also sought Wachtell’s advice with another Elliott matter in 2022. The parties announced a deal in September for Elliott’s Steven Barg to join Cardinal’s board alongside three other new independent directors. Cardinal Health also formed a new board committee to “support a comprehensive review” of its strategy, portfolio and more.

“Companies that have faced one activist are being approached, in the same year, or in subsequent years, by multiple activists or re-visited by the prior activist,” said Sabastian Niles, a partner at Wachtell. In regard to the universal proxy card, he said that “boards and management teams are in the spotlight, but companies can navigate from a position of strength.”

Representing Activists

Olshan Frome Wolosky LLP continued its reign as the go-to law firm for activists in 2022, with 147 engagements that had stakes valued at $19.4 billion, according to Bloomberg data. The firm’s work included Elliott’s successful campaign to get new directors to Cardinal’s board.

The firm also helped Legion Partners Asset Management LLC with its efforts to remove Guess? Inc. co-founders and brothers Paul and Maurice Marciano from the board. The campaign came after Paul Marciano faced sexual misconduct allegations.

The brothers, who owned 44.1% of Guess shares, kept their seats last April, despite opposition from what Legion said was about 83% of noninsider shareholders. Guess, which V&E helped advise, has said its board is investigating the claims against Paul Marciano.

Olshan spent a lot of time preparing for the SEC’s new universal proxy rules, said Meagan Reda, a partner at the firm. She said she expects board candidates’ records to hold more sway with investors under the new regulations.

“Now that shareholders have the ability to pick and choose from both the company’s slate and the dissident shareholder’s slate, the qualifications of each individual director will be key,” Reda said.