Decline of Activist Investing: Is It Becoming a Lost Art?

By TMC Research Staff | The Milwaukee Company | tmcresearch@themilwaukeecompany.com

For decades, activist investors were the dominant force on Wall Street—striking fear into boardrooms and reshaping corporate strategies with bold and relentless campaigns. Figures like Carl Icahn, Nelson Peltz, and Bill Ackman became synonymous with a fearless approach to demanding accountability and immediate returns. Their occasionally dramatic proxy battles and high-stakes interventions captured headlines and often redefined industries. Yet, as the corporate and financial landscapes evolve, the once omnipresent influence of activist investors appears to be fading, giving rise to new approaches that question whether this is a decline or a transformation.

The Age of the Corporate Raider

The roots of activist investing trace back to the 1980s, an era of aggressive takeovers and restructuring, famously depicted in the 1987 film Wall Street starring Michael Douglas. Investors known as "corporate raiders" would acquire significant stakes in underperforming companies, often using debt to finance their bids, and demand radical changes.

This approach was unapologetically adversarial. Activists like T. Boone Pickens and Carl Icahn built reputations as disruptors, often forcing the sale of divisions, slashing headcounts, or even dismantling entire companies. For their part, shareholders reaped substantial financial rewards—albeit with collateral damage to long-term stability and employee morale.

As the years progressed, the term “corporate raider” gave way to “activist investor,” a rebranding that softened the image of these players.

By the late 1990s and early 2000s, activists were positioning themselves not as destroyers but as stewards of shareholder value. Their demands shifted from mere cost-cutting measures to more nuanced strategies such as operational efficiency, innovation, and sustainable growth.

From Firebrands to Constructivists

Fast forward to the 2020s, and the landscape appears to have changed quite dramatically. Activist investing is no longer synonymous with public spats and bruising proxy battles. Instead, a new generation of activists seems to have emerged, favoring collaboration over confrontation.

Nelson Peltz’s transformation from an outspoken activist to a self-proclaimed "constructivist" epitomizes this shift. Peltz and others like him now emphasize working alongside management to achieve mutual goals, presenting themselves as partners rather than adversaries. In recent campaigns, activists have pitched complex turnaround plans, focusing not just on financial engineering but also on long-term strategic alignment.

The results speak for themselves. According to a 2024 analysis by FTI Consulting, nearly two-thirds of agreements between companies and activists were reached privately, avoiding the spectacle of a public proxy fight. This marks a stark contrast to earlier times, when drawn-out battles were the norm.

The Corporate Counterattack

Another key factor in the decline of high-profile activism is the evolution of corporate governance. Over the years, boards have become more proactive in addressing performance issues, often making changes before activists can step in. CEOs are being held to stricter accountability standards, and underperforming leaders are swiftly replaced.

Take Disney as an example. In 2023, Nelson Peltz waged a widely publicized campaign to secure board seats for himself and an ally, only to be rebuffed by shareholders. Disney’s management countered Peltz’s criticisms by demonstrating its progress, including operational improvements and enhanced EBITDA margins that matched or exceeded industry benchmarks​.

This trend underscores the diminished need for traditional activism. Companies are increasingly adopting the very practices that activists once demanded, from improving transparency to aligning executive pay with performance.

Challenges Facing the Activist Playbook

The subdued tone of modern activism is not solely a product of corporate evolution. Activists themselves are grappling with unique challenges that are reshaping their strategies.

1. Diminished Returns

Activist hedge funds have struggled to outperform broader market benchmarks. In 2024, activist funds delivered an average return of 6.4% according to HFR, compared to the S&P 500’s 25% gain​. This underperformance has made it harder for funds to attract capital and sustain high-profile campaigns.

2. Regulatory Headwinds

Changes in proxy voting rules and other regulatory measures have complicated the traditional activist playbook. With companies now able to consolidate voting power more effectively, activists face greater resistance when attempting to influence board composition.

3. The End of Low-Hanging Fruit

Many of the easiest and most profitable activist opportunities—companies with clear inefficiencies or misaligned incentives—have already been addressed. Today’s targets often require more nuanced and complex interventions, which are harder to execute and monetize.

Small and Nimble Activism

In place of the larger-than-life figures of the past, a new cadre of smaller, less confrontational activists has emerged. These players often focus on niche opportunities, leveraging data and strategic insights to influence corporate decisions.

For instance, firms like Engine No. 1 have achieved significant victories through calculated campaigns. Their success in securing board seats at ExxonMobil in 2021 demonstrated the power of focused, data-driven activism. Similarly, smaller funds have struck deals with companies ranging from Shake Shack to Twilio, achieving their goals with minimal fanfare​.

The Global Perspective

While U.S.-based activism appears to be maturing, the story is somewhat different in other markets. In Europe, activist campaigns reached record levels in 2023, driven by shareholder frustrations with slow-moving corporate cultures in countries like Germany and France. This regional variation goes to show the diverse ways in which activism is evolving across the globe.

Is Activist Investing a Dying Art?

The decline of celebrity activists has led some to declare activist investing a dying art. However, this perspective overlooks the adaptability of the practice. Activist investing is not disappearing; it is evolving.

The focus is shifting from personality-driven campaigns to institutionalized processes. The tools of activism—proxy battles, public statements, and strategic proposals—remain as relevant as ever, but their application is becoming more sophisticated.

In this new era, success will depend on quiet precision rather than noisy spectacle. Activists who can navigate these dynamics—working collaboratively with companies, leveraging data effectively, and maintaining a long-term perspective—are poised to thrive.

As the lions of yesteryear fade into the background, a quieter but equally impactful generation of activists is emerging. The art of activist investing may not be dying; perhaps it is entering a new phase in its evolution.

For enquiries contact Andrea Storey at astorey@themilwaukeecompany.com