The landscape of shareholder activism has undergone a fundamental transformation. What was once characterized by hostile proxy battles and public confrontations has evolved into a more sophisticated, collaborative approach that is reshaping how institutional investors should evaluate activist campaigns and their portfolio companies’ responses.
This shift became particularly evident in September 2025, when Elliott Management disclosed a $4 billion stake in PepsiCo—one of the activist fund’s largest positions to date.[6] The market’s immediate response was telling: PepsiCo’s stock jumped 5% on the announcement,[7] not because investors expected a dramatic boardroom battle, but because they recognized the value creation potential of constructive engagement. Elliott’s measured approach, calling for operational improvements while expressing intent to work “collaboratively” with management, exemplifies the new playbook that is becoming standard across the activism landscape.[6]
The numbers tell a compelling story. According to recent market data, nearly half of activist settlements in the first half of 2025 occurred without any public campaign from the hedge fund, compared to just 26% in 2023.[8] This represents a seismic shift in tactics: activists are increasingly achieving their objectives through private engagement, reserving public campaigns only when necessary.
For institutional investors, this evolution presents both opportunities and complexities. The traditional signals that once indicated activist interest—public letters, nomination notices, and media campaigns—are increasingly being replaced by quiet negotiations that conclude before hitting regulatory filings. The result is a more efficient market for corporate change, but one that requires more sophisticated monitoring and analysis.
Several structural forces are driving this shift toward cooperation. First, activist hedge funds now collectively manage close to $230 billion in assets—a 35% increase since 2022.[8] This growth has professionalized the industry, creating larger, more institutionalized funds with longer time horizons and stronger relationships with company boards.
Second, the universal proxy card, implemented in 2022, paradoxically reduced the need for proxy fights by making the threat of one more credible.[3] Companies now understand that activists can more easily wage effective proxy contests, which has encouraged boards to engage earlier and more substantively. The result: activists secured a record 112 board seats in the first half of 2025 despite a 23% decline in formal board representation demands.[4]
Third, and perhaps most significantly, the role of passive institutional investors—BlackRock, State Street, and Vanguard—has become decisive. These “Big Three” firms have generally supported incumbent management in contested elections, effectively raising the bar for activist success.[2] Smart activists have adapted by presenting more compelling, well-researched cases focused on operational improvements rather than quick M&A exits.
For institutional investors, this new era of activism requires a recalibration of how activist campaigns are evaluated and integrated into portfolio management strategies.
Enhanced Due Diligence on Governance: Companies with strong governance practices and proactive board refreshment are less likely to face activist pressure—or more likely to settle quickly and favorably if they do. Institutional investors should assess not just whether a company has good governance on paper, but whether boards are demonstrably responsive to shareholder feedback before activists get involved.
Operational Improvement as the New Frontier: The data is clear: operational activism has tripled as a percentage of total campaigns in the U.S., rising from 8% in 2020 to 25% in 2024.[5] This shift reflects activists’ recognition that sustainable value creation requires fundamental business improvements, not just financial engineering or M&A. Institutional investors should evaluate management teams’ track records in operational execution and their willingness to implement performance improvements.
The Settlement Premium: Companies that settle with activists early often benefit from a “cooperation premium” in their stock price, as the market rewards the avoidance of costly proxy fights and values the fresh perspective activists bring. Conversely, companies that resist reasonable activist demands—particularly when multiple institutional shareholders support the activist—often face prolonged uncertainty and valuation pressure.
CEO Vulnerability Has Increased: A striking trend emerged in 2024: 67 CEOs at U.S. companies departed within 12 months of a public activist demand—nearly tripling from 24 in 2023. This represents approximately 8% of all CEO departures, up from less than 3% the prior year.[3] For institutional investors, this suggests that boards are increasingly willing to make leadership changes rather than risk protracted activist campaigns. This dynamic should inform how investors evaluate management stability and succession planning.
The settlement-first approach has created a new strategic calculus for corporate boards. Directors must now balance three competing pressures:
First, the cost of resistance has increased. Modern proxy fights involve sophisticated campaigns, extensive institutional investor outreach, and significant management distraction—all while the outcome has become less certain for incumbents.
Second, the benefit of early engagement has become clearer. Boards that proactively address vulnerabilities and maintain ongoing dialogue with significant shareholders can often implement activist-style changes on their own terms, avoiding the reputational costs and stock volatility associated with public campaigns.
Third, the risk of appearing weak must be weighed carefully. Boards that settle too quickly or on unfavorable terms may invite additional activist attention, creating a perception that the company is vulnerable. This is particularly true in the emerging trend of “multi-activist swarming,” where several funds simultaneously target the same company.[1]
Not all campaigns end in settlements, and the exceptions are instructive. Elliott Management’s proxy fight with Phillips 66 in 2025 provides valuable lessons about when confrontation remains necessary. Elliott secured only two of the four board seats it sought on Phillips 66’s staggered 14-member board, despite support from proxy advisors ISS and Glass Lewis.[9] Both sides claimed victory, but the split decision highlights an important truth: even in an era of increased settlements, fundamental disagreements about strategy and value creation sometimes require shareholder adjudication.
The Phillips 66 campaign also demonstrated the sophistication of modern activist tactics. Elliott’s use of video interviews, comprehensive media campaigns, and legal challenges to governance structures represented a multi-dimensional approach that goes well beyond traditional proxy materials.[9] Institutional investors must recognize that even “settled” campaigns now involve extensive behind-the-scenes preparation and credible threats of escalation.
An under-discussed trend is the surge in first-time activists. In 2024, a record 160 unique activists launched campaigns, including 45 first-timers—more than established activist funds.[5] This democratization of activism presents challenges for both companies and institutional investors.
First-time activists may not follow established playbooks, creating uncertainty about their objectives, tactics, and willingness to compromise. They may lack the infrastructure and relationships that facilitate productive engagement with boards. However, they also bring fresh perspectives and, importantly, may be willing to target situations that larger funds pass over due to size constraints.
For institutional investors, first-time activist campaigns require enhanced scrutiny. The quality of analysis, reasonableness of demands, and credibility of value creation plans vary dramatically. However, these campaigns also present opportunities: stocks targeted by lesser-known activists often experience less immediate price action, potentially creating attractive entry points for investors who conduct independent analysis and agree with the activist thesis.
As we look toward 2026 and beyond, several trends merit attention:
M&A-Focused Activism May Resurface: With a more favorable M&A environment potentially emerging, activists may increasingly pursue transaction-driven campaigns.[1] The premium associated with M&A outcomes remains attractive compared to multi-year operational transformations.
AI and Data Analytics: Activists are deploying increasingly sophisticated analytical tools to identify vulnerable companies and build compelling cases. Companies without robust defenses—including their own analytical capabilities—may find themselves at a disadvantage.
Multi-Year Campaigns: Several high-profile activists are demonstrating patience, maintaining positions for multiple years and through complete business cycles. This long-term approach aligns activist incentives more closely with other long-term shareholders but requires sustained board engagement.
Classified Boards Under Pressure: The trend of activists challenging staggered boards—historically considered a strong defense—suggests that even traditional anti-takeover mechanisms are being successfully targeted.[2] Companies should evaluate whether classified boards remain effective deterrents or simply delay inevitable change.
The evolution from confrontation to collaboration in shareholder activism represents market efficiency at work. Activists, companies, and institutional investors have collectively recognized that value creation through operational improvements and strategic repositioning often produces better outcomes than winner-take-all proxy battles.
For institutional investors, this new landscape requires more sophisticated analysis. The absence of a public campaign does not mean activists are absent; it may simply mean they are engaging productively behind closed doors. Companies that settle quickly are not necessarily weak; they may be demonstrating sophisticated governance and strategic flexibility.
The key insight is this: shareholder activism has matured from a specialized tactic employed by a handful of funds into a normalized mechanism for corporate accountability and value creation. Institutional investors who understand this evolution—and who can distinguish between productive activism and value-destructive agitation—will be better positioned to support the right outcomes and benefit from the resulting value creation.
The Elliott-PepsiCo engagement will serve as an important test case.[6][7] If the parties reach a constructive settlement that drives operational improvements and unlocks value, it will further validate the collaboration model. If the campaign devolves into a protracted battle, it may signal that even in this new era, some situations still require traditional activist combat. Either way, the outcome will provide valuable data points for how institutional investors should evaluate the next wave of activist campaigns.
The future of activism is not less confrontational because activists have become less ambitious—it is less confrontational because boards have become more responsive, institutional shareholders have become more engaged, and all parties have recognized that value creation is a positive-sum game. That recognition, more than any regulatory change or tactical innovation, represents the true maturation of shareholder activism.
Referenced Sources:
[1] Harvard Law School Forum on Corporate Governance, “Shareholder Activism – 2024 Review and 2025 Outlook,” March 14, 2025, https://corpgov.law.harvard.edu/2025/03/14/shareholder-activism-2024-review-and-2025-outlook/
[2] Harvard Law School Forum on Corporate Governance, “Shareholder Activism Developments in the 2025 Proxy Season,” June 18, 2025, https://corpgov.law.harvard.edu/2025/06/18/shareholder-activism-developments-in-the-2025-proxy-season/
[3] Harvard Law School Forum on Corporate Governance, “U.S. Shareholder Activism Review 2024 and a Look Toward 2025,” March 12, 2025, https://corpgov.law.harvard.edu/2025/03/12/u-s-shareholder-activism-review-2024-and-a-look-toward-2025/
[4] Diligent Market Intelligence, “Shareholder Activism Hits Record High in the U.S. With a New M&A-Driven Wave Expected in 2025,” February 18, 2025, https://www.businesswire.com/news/home/20250218080447/en/
[5] Barclays, “2024 Review of Shareholder Activism,” January 21, 2025, https://corpgov.law.harvard.edu/2025/01/21/2024-review-of-shareholder-activism/
[6] Hedgeweek, “Elliott Management launches activist campaign at PepsiCo after building $4bn stake,” September 3, 2025, https://www.hedgeweek.com/elliott-management-launches-activist-campaign-at-pepsico-after-building-4bn-stake/
[7] CNBC, “Pepsi shares jump as activist Elliott takes $4 billion stake, sees ‘historic’ value opportunity,” September 2, 2025, https://www.cnbc.com/2025/09/02/pepsi-shares-jump-4percent-after-wsj-reports-elliott-planning-major-activist-campaign.html
[8] AOL Finance, “Elliott is taking on Pepsi, but today’s activist campaigns are more playbook than knife fight,” September 3, 2025, https://www.aol.com/feared-activist-investor-elliott-management-152852330.html
[9] Harvard Law School Forum on Corporate Governance, “Wildest Campaigns 2025,” August 23, 2025, https://corpgov.law.harvard.edu/2025/08/23/wildest-campaigns-2025/