IN-DEPTH: Q&A with Goodmans on the evolving activism landscape in Canada
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An interview with Jon Feldman, partner and head of the shareholder activism advisory practice at Goodmans, on the evolving activism landscape in Canada.
Activists operating in Canada secured 48 board seats in 2024 compared to 44 the previous year, according to Diligent Market Intelligence (DMI) data. What factors are influencing their success?
Activists that are successful are very good at understanding the shareholders of the company and where their support lies. I’m always of the view that in Canada, shareholders can talk to each other, but there’s been a whole series of litigations over the past few years about shareholders talking to each other and being sued for acting jointly. In the last year or so there’s been a lot of clarity out there to say that they’re not joint actors. Simply talking to each other does not mean they are acting as a group.
Once that freedom is available and shareholders feel comfortable in their ability to communicate with each other, it allows them to build campaigns with a lot more information than in the past without being afraid of being found in court.
Are companies more prepared for activism in Canada and how have they been adapting their defences?
Canada is viewed as a very shareholder-friendly jurisdiction. Companies in Canada are very hamstrung in their ability to defend compared to others. So how do they do it? They spend a lot more time getting to know their shareholder base. Number two, they have the ability to control the timing and the cost associated with a fight. In many cases, boards will speak to their shareholders and they'll get a sense of whether there's a desire to fight, and if there is, then boards can line up their advisors and take their time. There's numerous tactics that are available to them if they're prepared to fight. What we find in Canada, which is not different from most countries, is that these matters usually settle because the shareholders want to try to find a solution. That's what happened in numerous fights last year. They're much more aware in Canada than they used to be of the presence of activists, and they are trying their very best to be proactive in the way that U.S. companies have been doing for years.
Turning to settlements, activists in the region secured 27 seats using this method last year compared to 25 in 2023. Are companies more open to such agreements?
I have the benefit of advising both boards and activists. It's a lot easier to advise an activist as they only have one voice. When you're advising a board, which can have up to 15 people, you have hawks and you have doves. There's often a huge debate in the boardroom as to what to do in an activist situation. Do they want to go after their shareholders? Do they want to settle with the shareholders? Do they want to spend the money? It's a huge distraction for the board and for management. I think when boards feel that they can make it go away, they will do so if they believe the activist is someone they can work with. Overall, it really depends on who the activist is, what the board composition looks like and who's taking the lead. I think most people recognize that a costly and protracted proxy fight only benefits the advisors.
How has the activism landscape changed in Canada over the past decade?
I would say that it's matured significantly. There's a much more refined market and there are now people that are experts; on every file it's usually the same people that are involved. I think there's a better understanding of the rules of the game.
The proxy fights at Gildan Activewear and Dye & Durham were two of last season's standout campaigns in the region. What can boards learn from these situations?
I think that the number one lesson for both of those boards is that shareholders are going to have their day. You can delay it, you can fight it, but ultimately shareholder democracy prevails. I think it's really important for both the board and the activist to know where they stand with their shareholders. The best thing you can do in a fight (because they're very expensive and very time consuming) is making sure that you have a realistic view of where shareholders are because the losing sides on both of those battles were delusional when it came to where they thought the support was coming from.
How do you expect M&A to feature in Canada this year given continued uncertainty in the market?
I would have told you it was going to be big, but with the tariffs, we're all navigating a world of uncertainty where nothing is clear. If you put that aside, then I would say there's a bit of it there. It's been a phenomenal year so far. The first two months of 2025 have been spectacular in terms of M&A and in terms of proxy.
I think that if you're a poor performing company and activists see that there has been success in Canada, you have to watch out. They need to think like activists and prepare and understand their own vulnerabilities because the activists are coming. No company in Canada is truly safe. Activists are becoming bolder. Funds are growing and with that, the targets are only getting bigger. Americans like coming to Canada because our larger companies are basically mid-tier companies to them. They're big enough that they can spend their time, money and resources and it's not as overcrowded as much as it is in the U.S.
