IN-DEPTH: Amid drop off in activism in Q1, Canada sees surge in settlements
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Amid a volatile market environment driven by Trump-imposed tariffs, the opening quarter of 2025 saw a drop off in the number of companies subjected to public activist demands in Canada, with the volume of settlements surging forward.
According to Diligent Market Intelligence (DMI) data, 14 Canada-based companies were targeted by activists in the first quarter of the year, compared to 22 companies in the same period in 2024 and 26 in the opening quarter of 2023.
“There are a number of uncertainties we’re facing today, and markets typically don’t respond well to them," Victor Li, executive vice president of governance advisory at Kingsdale Advisors, told DMI, while adding that subsequent quarters may reveal a different picture. "If the U.S. continues, or is even perceived to continue, with reciprocal tariffs on Canada over the next few quarters, valuations for some Canadian public companies will likely come under pressure. That could prompt renewed activist calls to sell, restructure or pursue growth outside of Canada.”
The opening quarter saw just one Canada-based issuer face an M&A demand with industry sources observing many potential targets being taken out of play due to a recent rise in privatizations and restructurings.
“I think that we are seeing many go-privates get started and get done, which is taking otherwise obvious activist targets out of play. Additionally, there has been a major rise in restructurings this year, which again has taken certain likely targets off the table,” Jonathan Feldman, partner and head of the shareholder activism advisory practice at Goodmans, told DMI in an interview.
Finding terms amid the turbulence
With markets in a state of flux, commentators have argued that issuers in the region, which is already seen as settlement-friendly, could be even more eager to work out terms with activists to avoid a fight.
Indeed, board seats gained by activists through settlements in Q1 surged forward with 10 seats gained via the method compared with two in the first quarter of 2024.
Feldman told DMI that the shift to settlements reflects a “reversion to the mean, which is driven by the uncertainty the long and protracted proxy battle creates for both sides of the fight right now.”
That tendency to settle was also evidenced at Canada targets in 2024 with a record 27 of the 48 total seats won via this method compared to just seven in 2021.
Outside of settlements, activists secured a record 21 board seats in contests that went to a vote in Canada in 2024. Their success was primarily at targets with poor CEO succession plans, according to Li, who outlined that one of the main reasons for the increase in the number of activists gaining seats is that "coming out of COVID, many companies didn’t have a good plan for their CEO succession.”
One such campaign at Dye & Durham saw its incumbent directors step down to make room for Engine Capital’s six board designees and the one candidate backed by OneMove Capital, hours before the company’s annual and special meeting last December. The Canadian legal software provider's CEO Matthew Proud had announced his decision to step down a month earlier as it faced the activist's demands for a board refresh. Engine Capital founder Arnaud Ajdler had criticized the lack of independent directors on the board, stating that “if the independent directors could stand up to Proud, we believe a settlement would have been reached a long time ago.”
“Sometimes boards are not willing to hold a higher standard to their CEO, and when you don’t have that healthy dynamic between the CEO and the board, the CEO can stay there too long without identifying or grooming a successor, and this leads to the board being more vulnerable. The most important job of a board is to identify the CEO, incentivize the CEO, and fire the CEO when things go wrong,” explained Li.
A matter of national pride
Looking ahead and as tensions potentially simmer over tariffs and other measures, the proxy fight landscape in Canada could also change shape and become a matter of national pride. "U.S.-based activists targeting Canadian companies may face pushback from domestic institutions," said Li. "The Canadian government’s recent update to the guidelines under the Investment Canada Act is aimed at curbing hostile foreign acquisitions of companies deemed critical to Canada’s economic security — a change proposed by our founder and CEO, Wes Hall. While some activists may advocate for relocating companies to the U.S., doing so is far from straightforward in the current geopolitical and regulatory climate."
