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Activism reviewed in context of capital used to produce goods and services

 

The report described in the press release below addresses current "activism" trends in the context of a credit analyst’s concern about corporate risk and access to capital that may be required to adapt to future threats and opportunities, and includes a final section listing key elements of 54 activist campaigns observed in 2015. A copy of the report is being made available for private review of Forum participants interested in a company’s long term ability to produce goods and services:

 

Source: Moody's Investor Service, November 10, 2015 announcement


 

Announcement: Moody's: Shareholder activism to reach record high for campaigns in 2015, but ebb in 2016

Global Credit Research - 10 Nov 2015

New York, November 10, 2015 -- Shareholder activism is set to reach a record high in 2015, with primarily credit-negative implications for companies and credit investors alike, says Moody's Investors Service.

Moody's notes that as of 15 October there have been 178 public shareholder activist campaigns, compared with 165 over the same timeframe last year. Furthermore, the rating agency expects campaigns at non-financial corporates to total 225-235 at year-end, an uptick from 222 last year.

"Activists still have plenty of firepower to shake up company boards, push for M&A activity and seek business strategy changes," said Christian Plath, a Moody's Vice President and Senior Credit Officer. "But activism has become a crowded field, with too many players chasing after a diminishing number of attractive targets. And recent market volatility has somewhat reduced their ability to launch new campaigns."

The technology sector has continued to be the most prone to activists, making up 33% of North American companies targeted since the start of 2015. Other highly targeted sectors include commercial & distribution services and healthcare.

However, the rating agency expects mounting challenges for activists to cause instances of shareholder activism to level off or even decline in 2016 for North American non-financial corporates. A number of headwinds could change or even reduce activists' demands, according to the report "Following Record Year, Activism Will Cool in 2016."

While separating companies' real estate and other physical assets has been an increasingly popular demand among activists, increased scrutiny by the Internal Revenue Service of real estate spinoffs could slow activist activity in this area.

Moody's also notes that the potential hike in interest rates and preemptive moves by companies to make shareholder-friendly gestures have caused demands for shareholder returns in the form of dividends and buybacks to level off from previous years.

"The biggest threat to activists would be a prolonged downturn in the equity markets and continued volatility in the commodities sector," said Plath. "In the event of a sustained downturn, companies would take the wind out of activists' sails by lowering their risk tolerance and adopting more conservative strategic and financial policies. And the energy sector, when stable, has traditionally been a hotbed of activist activity."

Moody's subscribers can access this report at

https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_185509.

***

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Christian Plath
VP - Sr Credit Officer
Credit Policy
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
 

Mark Lamonte
MD - CCO Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653


 

© 2015 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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© 2015 Moody's Investors Service, Inc., Moody’s Analytics, Inc. and/or their affiliates and licensors. All rights reserved.

 

 

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