Settlement Agreements with Activist Investors

An increase in settlements between public companies and activist investors that have targeted a campaign against a company has been widely reported. An increase in the speed with which these settlements occur—meaning the number of days a settlement is reached after an activist initiates a campaign—has also been widely reported. Some commentators attribute increased settlements to boards being motivated to avoid the costs, distractions and negative publicity that usually come with an extended proxy contest. Other commentators suggest that increased settlements are an indication that boards have begun to recognize the value that activists and other shareholder representatives can bring to a board. The driving force behind increased settlements, however, may be altogether different. Companies may be more frequently seeking settlements with activists, not in the name of good corporate governance, but for a less noble reason—as a defensive measure.