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Sidley Austin Nabs Early Lead in Big Law Activist Investor Bouts

July 7, 2022, 9:00 AM

Sidley Austin LLP has emerged as the go-to law firm for companies fending off activist shareholders this year, pulling in more work than any of its peers.

The firm helped companies handle 30 activist campaigns in the first half of 2022—only seven engagements shy of its year-end tally of 37 for 2021, according to new Bloomberg data. Its clients included US Foods Holding Corp. and Hasbro Inc., which repelled an investor’s bid for a new board member.

Total shareholder stakes in Sidley’s matters were valued at $6.9 billion as of June 30, surpassing the $5.2 billion the firm handled for all of last year. The statistics encompass the value of stock that activist investors hold when pursuing campaigns.

Activist investors are waging more campaigns after a lull during the height of the Covid-19 pandemic, said Kai Liekefett, a Sidley partner who helps lead the firm’s shareholder activism practice.

“Our practice has been booming,” Liekefett said. “I never had a more busy proxy season in my life.”

Vinson & Elkins Trails

Vinson & Elkins LLP came in second when ranked by engagements, with 17 matters so far this year, according to the Bloomberg data. But the shareholder stakes in its matters were only $2.9 billion, putting the firm further down the list when ranked by that metric. Wachtell, Lipton, Rosen & Katz far surpassed V&E with stakes valued at $6.6 billion.

V&E also was at the No. 2 spot for engagements halfway through 2021, but ended the year on top with 38 projects.

The firm’s clients this year included risk assessment company Verisk Analytics Inc. and Guess? Inc., which faced an investor effort to take away board seats from the apparel company’s two co-founder brothers. One of brothers, Paul Marciano, faced sexual misconduct allegations.

Legion Partners Asset Management, which owned about 2.5% of Guess, pushed for the shakeup after the company investigated claims against Marciano in 2018 and couldn’t verify many of them, Bloomberg News reported.

The investor found at least 17 women who alleged sexual misconduct involving Marciano, leading the company to pay at least $920,000 in settlements. Guess has said it’s investigating Legion’s claims.

Patrick Gadson, a V&E partner who helps lead the firm’s shareholder activism practice, said he’s encountering more activist campaigns focused on social and corporate governance concerns.

“We are starting to see campaigns that are launched that aren’t really traditionally economic,” Gadson said. “They might have some economic aspects to them, but for the most part, they’re ‘S’ campaigns or ‘G’ campaigns.”

Hasbro’s Fight

Sidley Austin’s work for Hasbro against an activist shareholder was over a more traditional concern: value creation.

Alta Fox Capital Management LLC, which had a stake of about 2.6%, has pushed Hasbro to spin off its Wizards of the Coast playing card and digital gaming business and pursue a strategy that doubles the toymaker’s stock value over three years, Bloomberg News reported.

But Hasbro investors reelected the company’s 13 directors this year, rejecting the hedge fund’s candidate.

Hedge funds have spent the past couple years preparing to take on big companies, Liekefett said.

“They’re chomping at the bit,” he said. “They have the capital. They have the drive. They’ve done all the research.”

Wachtell’s Work

Activist shareholders brought 130 campaigns against companies with market capitalization of at least $1 billion so far this year, a 7.4% increase from this time in 2021, the Bloomberg data shows. But the overall number of new campaigns was down 5.5% halfway through 2022, with 294 matters compared to 311 in the first six months of 2021.

Total stakes also dropped 1.6%, from $43.4 billion in the first half of 2021 to $42.8 billion halfway through this year.

Wachtell took third place for the number of engagements on activist campaigns. The firm, which has secured 16 engagements so far this year, was a close third after Vinson & Elkins, according to Bloomberg data. The firm also secured 16 engagements in the first half of 2021, the data shows.

Latham & Watkins and Wilson Sonsini Goodrich & Rosati were also in the top five with 12 and 11 engagements, respectively. Wilson Sonsini has continued to move up the ranks and is one of the firms advising Twitter Inc. on Elon Musk’s proposed $44 billion acquisition of the social media company.

Wachtell advised Ryder System Inc. in a $4.4 billion May bid where activist investor HG Vora Capital Management sought to take the transport company private. The firm also advised Chesapeake Energy Corp. when Kimmeridge Energy Management Co. LLC in May pushed for changes and argued that the company’s shares are undervalued.

Wachtell partner Sabastian Niles said activist investors haven’t let up, “even in this new period of market volatility,” and are seeking a range of outcomes, including management changes or abandoning a merger. “Activists are developing new playbooks, and companies will continue to prepare,” he said.

Niles emphasized that the firm advises on a number of private matters behind the scenes.

Olshan Leads Campaigns

Olshan Frome Wolosky LLP is once again the firm taking the lead for shareholders. Olshan secured 96 engagements this year where the stakes totaled over $13 billion, according to Bloomberg data.

Olshan represented activist investor and GameStop Corp. chairman Ryan Cohen against Bed Bath & Beyond Inc., reaching a March settlement for three board seats at the home goods company from Cohen’s firm.

Last year, Olshan took on 74 engagements in the first half of 2021 and 119 campaigns in total with investor stakes valued at $16.3 billion, according to Bloomberg data.

Schulte Roth & Zabel LLP was the runner-up with 30 engagements so far this year.

Meagan Reda, a partner at Olshan, said the campaign work is rebounding after the Covid-19 pandemic. Activists feel more confident about targeting companies now that businesses have had time to adjust, she said.

Reda said she’s recently noticed companies taking more action to appease shareholders by refreshing their boards, ultimately in an effort to make it more difficult for activists to run campaigns. Where companies may have previously added one director, they will now add two or three directors along with making other governance changes, she said.

The firm represented Outerbridge Capital Management in its campaign against Barnes & Noble Education Inc. In June, the education company renewed an agreement with Outerbridge and agreed to nominate Outerbridge’s chief investment officer to the board of directors.

To contact the reporters on this story: Andrew Ramonas in Washington at aramonas@bloomberglaw.com; Clara Hudson in Washington at chudson@bloombergindustry.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com, Melissa B. Robinson at mrobinson@bloomberglaw.com