Shareholder Activism and M&A Valuation: Navigating Governance Risks in 2025

In 2024-2025, shareholder activism has emerged as a transformative force in corporate governance and M&A strategy, reshaping deal valuations and boardroom dynamics. According to a Harvard Law School report, activist campaigns surged to record levels, with nearly 600 public campaigns in the U.S. alone in 2025-a 16% increase from 2022. This escalation reflects a broader trend: institutional and minority shareholders are no longer passive observers but active participants in corporate decision-making, particularly in M&A transactions.

Activism as a Catalyst for M&A Valuation Shifts

Activists have increasingly leveraged M&A as a tool to unlock value, employing tactics such as "bumpitrage" (pressuring bidders to raise offer prices) and "breakitrage" (challenging value-decreasing deals). For instance, in the UK, activist shareholders secured a 12% price bump in CMA CGM's $1.6 billion bid for Wincanton through irrevocable undertakings, according to an HSF Kramer report. Similarly, in Japan, shareholders opposed Taisho Pharma's $5 billion management buyout, triggering a court battle that delayed the deal and forced renegotiations, as a Diligent review documents. These cases underscore how activism can directly influence deal terms, often resulting in higher valuations for target companies.

Quantitative data reinforces this trend. Lazard's annual review found that 56% of activist campaigns in 2024 included demands for M&A-related actions, up from 42 in 2023. This shift is particularly pronounced in cash-rich sectors like healthcare and technology, where activists push for spin-offs or carve-outs to eliminate conglomerate discounts. For example, Vivendi's 2024 decision to split into four listed entities followed sustained shareholder pressure, unlocking an estimated €3 billion in value, according to a Harvard corpgov review.

Corporate Governance Risks and Leadership Overhauls

The governance implications of shareholder activism are equally profound. Data from Harvard's proxy-season analysis reveals that 67 U.S. CEOs exited their roles within 12 months of an activist campaign in 2025-nearly tripling the 2023 figure. This "CEO turnover effect" is often tied to demands for board refreshment and strategic realignment. At Navitas Semiconductor, activist investor Dr. Ranbir Singh's campaign led to the replacement of the chairman and the appointment of an independent director to replace the CTO/COO, as detailed in a Mofo insight (see below). Such interventions highlight the growing power of shareholders to reshape leadership structures, albeit with potential short-term volatility.

The universal proxy card rule, enacted in the U.S. in 2024, has further amplified governance risks. By allowing activists to present competing slates of directors, the rule has increased the stakes of proxy contests. While activist win rates for board seats have declined slightly, behind-the-scenes settlements now often include tailored governance provisions, such as revised bylaws or enhanced shareholder rights, per Harvard's 2024 outlook.

Mitigating Risks: Proactive Engagement and Strategic Resilience

To navigate these challenges, companies are adopting proactive engagement strategies. A Faegre Drinker report notes that boards are increasingly prioritizing transparent communication with shareholders, particularly during takeover discussions. For example, TransDigm's acquisition of Servotronics followed a shareholder-led push for workforce preservation and governance reforms, demonstrating how collaboration can align activist goals with corporate strategy, as discussed in the HSF Kramer report mentioned above.

However, the evolving landscape also demands robust risk management. Companies must anticipate activist campaigns by identifying vulnerabilities-such as undervalued stock or inefficient capital allocation-and addressing them preemptively. As macroeconomic conditions stabilize in 2025, the focus on ESG (Environmental, Social, and Governance) metrics is likely to intensify, with activists leveraging sustainability concerns to justify governance changes, as noted in the Diligent review referenced earlier.

Conclusion

Shareholder activism in 2024-2025 has redefined the interplay between corporate governance and M&A valuation. While activists have successfully driven higher deal prices and governance reforms, their influence also introduces risks, including leadership instability and contested transactions. For investors, the key lies in balancing the potential for value creation with the need for strategic resilience. As the data shows, companies that engage proactively with shareholders and adapt to governance trends are better positioned to thrive in this dynamic environment.

Occasional Activists and the Evolving Landscape of Shareholder ...```