Activists advocating on behalf of shareholders encountering hardships

In the first quarter of the year, the financial market witnessed a surge in investor activity, with 70 new campaigns launched, marking a 17% increase compared to the previous year. This trend, however, took a downturn in the second quarter, as only 59 new campaigns were added, resulting in a 12% decrease compared to the same period in 2024.

One of the notable players in this arena is H Partners Capital LLC, the investment firm behind the "Withhold the Vote" campaign against Harley-Davidson. The firm's intentions, like those of many activist investors, typically revolve around selling the target company, breaking it up, or selling less profitable assets.

Shareholder activists have long been contributing to the functioning of the financial market by pushing for changes in companies with shortcomings. However, the current economic climate, characterised by geopolitical uncertainty and volatile trade and fiscal policies, has presented new challenges.

The Trump administration's policies, for instance, have led to slower deregulation than expected, a potential consequence that is affecting activist investors. Kai Liekefett, a partner at law firm Sidley Austin, echoes this sentiment, stating that Trump's policies have made it more difficult to build long-term corporate stakes and communicate with boards and shareholders.

The surge in market volatility due to Washington's trade and fiscal policy is another factor affecting activist investors. This volatility has led to activists being less likely to face votes at annual meetings and instead reaching deals with targeted companies in an uncertain environment.

The M&A market, too, is still facing significant headwinds due to this geopolitical uncertainty. According to Barclays, M&A targets appeared in 33% of campaigns in the first half of the year. However, the value of global deals increased by 15% in the first half, but the number fell by 9%.

The Trump administration's increased involvement in large transactions, such as the takeover of US Steel by Nippon Steel, is another factor to consider. This involvement, coupled with the uncertain economic environment, is posing challenges for shareholder activists.

In the case of US Steel, Ancora Holdings dropped its campaign against the company due to Trump's order for a new review of the Nipson deal. This demonstrates how the political landscape can impact the strategies of activist investors.

Despite these challenges, there are still signs of optimism. John Waldron, President and Chief Operating Officer of Goldman Sachs, expects a continued focus on large mergers. However, it is clear that the activist investing landscape is evolving, and investors must navigate these changes with caution.

Finally, it's worth noting that many activist investors supported US President Donald Trump, but now regret it due to the impact of his trade and fiscal policy on market volatility. This shift in sentiment underscores the complex relationship between politics and finance, and the need for investors to stay vigilant in this dynamic environment.