"Boardroom Raiders Boom"... Activist Funds Achieve Record High Activity in Q1

So far this year, activist funds that emphasize governance improvement and shareholder return policies have become more active in the global capital markets. Analysts say that activist funds are thriving by exploiting the "weak link" of global stock market sluggishness caused by interest rate hikes.

According to investment bank (IB) Barclays on the 11th, global activist funds conducted 83 campaigns in the first quarter of this year. This is the highest number ever estimated for the same period. Activist funds are private equity funds that secure a certain level of voting rights and then demand asset sales, restructuring, governance improvements, etc., to realize profits in a short period.

Among these, campaigns by European and Asian activist funds accounted for more than half. Foreign media paid particular attention to Align Partners, a Korean activist fund.

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One foreign media outlet analyzed, "The most active during the first quarter of this year was Align Partners, a small Korean fund founded by CEO Changhwan Lee, a former private equity executive," adding, "This activist, who conducted eight campaigns in the first quarter, became known for the so-called 'K-pop war' with SM Entertainment."

Led by CEO Lee, Align Partners actively participated in management by securing a 1% stake in SM and submitting shareholder proposals demanding governance improvements. In this process, Lee Soo-man, the former chief producer who founded SM, stepped down from the front lines of management.

In the U.S., Elliott Management pressured the management by acquiring a large stake in Salesforce, the world's largest enterprise software provider. Elliott demanded a seat on Salesforce's board of directors. However, after Elliott's pressure, management's cost-cutting efforts and stock price increases led to the withdrawal of the proposal.

Carl Icahn, famous as a "corporate raider," also declared war on management by acquiring shares in Illumina, a global genetic analysis solutions company. The reason was that Illumina forced the acquisition of Grail, a blood testing company, despite regulatory opposition, causing additional costs and harming shareholders.

Business Insider analyzed, "Activists who had paused at the peak of the COVID-19 pandemic are returning as global stock prices fall due to individual company issues, interest rate hikes, and other factors." Another foreign media outlet noted, "The stock price decline created fertile ground for proxy wars in the first quarter," pointing out that "the era of boardroom raiders is booming, with activist fund activities increasing to an all-time high."

Views on activist funds are divided. They are called "saviors of minority shareholders" or "wise investors in the capital market" by enhancing corporate and shareholder value, but on the other hand, they also have a strong negative image. There are also perspectives that see activist funds as "greedy predators" seeking only short-term capital gains and "corporate raiders" who engage in "eat-and-run" tactics.

Meanwhile, based solely on the U.S., activist fund campaigns in the first quarter of this year were counted to have decreased by 30% compared to the same period last year.

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