Elliott's Paul Singer -- The 800-Pound Gorilla of Activism
Elliott has current on-going insurgencies at companies in eight different countries.

In April, Elliott Management Corp. publicly urged BHP Billiton Ltd, a massive Anglo-Australian mining, metals and petroleum company, to spin off its U.S. oil business.

In May, the activist fund launched a campaign to have Santa Clara, Calif.-based Gigamon Inc. (GIMO) evaluate a sale of the business.

By August, the insurgent investor initiated separate efforts to disrupt Dutch NXP Semiconductors NV's $47 billion sale to Qualcomm Inc. (QCOM) as well as Bain Capital and Cinven Ltd.'s multi-billion buyout of German pharmaceutical company Stada Arzneimittel AG.

In September, Elliott Management reported a 5% stake in Hitachi Kokusai Electric Inc. (HTKKY) and put pressure on buyout shop KKR & Co.'s (KKR) acquisition of the Japanese communications equipment company.

The activist campaigns, taking place in Australia, U.S., Germany, Netherlands, and Japan, are just a few of Elliott Management's 2017 insurgencies occurring on multiple continents. Nevertheless, they can be cited as examples for why the $34 billion fund, led by billionaire Paul Singer, is the 800-pound gorilla of activism. The fund, which in many ways is a multi-strategy global investment firm, is in a whole class by itself when compared to other funds engaging in activism across the globe.

"Elliott is everywhere," said Jim Rossman, managing director at Lazard. "Unlike the other activist teams that run in pyramid structures out of New York, or in the case of Cevian Capital or TCI or Knight Vinke, Sweden or London, Elliott is truly diversified and it has many more mid-level people who can pursue ideas."

Consider that most activist fund operate out of one city or country as a base, even if they venture to other continents to occasionally launch campaigns. Elliott, on the other hand, has bases of operation, with portfolio managers in Hong Kong, London, and the U.S. It has current on-going insurgencies at companies in eight countries: the U.S., U.K., Germany, Canada, Japan, Italy, Hong Kong and Netherlands. 

Another way to demonstrate Elliott's domination of the activist game is to take a look at assets deployed globally for campaigns. An Oct. 4 Lazard study reports that activists have allocated roughly $45 billion in capital for 124 activist campaigns globally in 2017 so far, nearly double the total for all of 2016 (at corporations with more than $500 million in market caps). Elliott Management is the largest contributor to that statistic, with $9.9 billion deployed in activist positions in 2017, roughly one-fifth of the total. In addition, Lazard notes that Elliott launched 12 new campaigns in 2017 so far and has $17 billion allocated to current activist positions. It is a leader in both campaigns and activist positions.

In addition, Elliott also engages privately with companies, so expect the number of ongoing activist campaigns to be larger than the list provided by Lazard, when considering behind-the-scenes engagement. It also invests in distressed debt, structured products and commodities and the fund recently set up a Menlo Park, Calif.-based private equity firm, Evergreen Coast Capital Partners, another move that adds some depth to its activist strategy. The unit quietly has submitted a bid to buy Gigamon, a traffic monitoring technology company that had recently come under pressure by Singer's fund to sell itself.

All those numbers sets Elliott far apart from the firm with the second greatest allocation to new activist campaigns in 2017, Bill Ackman's Pershing Square Capital Management LP and its $4 billion allocated to new campaigns. A big part of that allocation involves the fund's recent campaign at Automatic Data Processing Inc. (ADP) . Sweden's Cevian Capital has the second most capital allocated currently toward activist campaigns, with $15 billion in campaigns underway in seven European countries, though the fund only has launched two new insurgencies this year, according to Lazard.

Elliott's domination of the activist game isn't new. The insurgent manager has been among the most prolific activists over a number of years. According to FactSet, the fund has launched 131 campaign at 126 companies since 1994, including 15 proxy fights. Jonathan Pollack, a long-time Elliott employee who was promoted to the position of co-chief executive in 2015, oversaw the global build out of its activist strategy, with an early focus in the 1990s on closed-ended fund arbitrage activism. Jesse Cohn, who focuses on technology activism and currently oversees U.S. equity activism, was also a key pioneer an early driver of the equity activism strategy for Elliott. The fund set up its London office in 1995 and its Hong Kong operation in 2005. Singer's son, Gordon Singer, runs the U.K. office. 

Gordon Singer, Elliott Management, ,
Gordon Singer, Elliott Management, ,

Lazard categorizes Elliott Management predominantly as an event-driven activist, noting that M&A was an objective at seven of the fund's new campaigns in 2017. Rossman notes that Elliott and other event-driven activists aren't as long term as operational activist funds and will liquidate their positions if they don't see any prospects for an M&A catalyst down the road.

"Elliott is primarily an event-driven activist," said Rossman. "Most of the campaigns are usually around, 'the company is not seriously looking at strategic alternatives or a break up the company thesis.' Every once in a while they get frustrated and they seek to get directors on the board."

Ali Dibadj, a partner and senior analyst at Bernstein, argues that Elliott Management has the resources needed to support their activist campaigns over long-periods, which also sets the fund apart from other activist managers. The fund famously held out for 15 years before reaching a deal with the Argentinian government over debt it owned. "They can leverage their resources to push management teams," he said.

Indeed, proxy solicitors advising both companies and targets argue that Elliott Management will spare no expense in its campaigns, coming up with unusual and innovative strategies to convince investors to back their efforts. In Australia, Elliott paid for billboards in Sydney, Melbourne, Brisbane and Perth urging shareholders to "Think Smart," a play on the company's slogan "Think Big." In the U.S. the fund, in an unprecedented move, even mailed thousands of mini-player devices to retail investors each with one short four-minute video explaining the activist's position at a targeted company.

In some ways, Elliott's global approach to activism has emerged out of its international multi-strategy approach to hedge fund investing. The fund's activism in Europe has developed following its London office's merger arbitrage focus, and a lot of its activism there has focused on M&A.

The fund has come to specialize in the so-called "bumpitrage" activist strategy for Europe, a play on the word arbitrage to describe a situation where an activist fund accumulates a significant enough stake to independently or together with like-minded investors block a deal from gaining shareholder approval or to affect a mandatory squeeze out of minority investors. The goal is to accumulate a big enough blocking stake in order to drive a higher offer price at a significant profit. Elliott has employed the strategy in the midst of a number of deals in recent years, including recently to push South African Retailer Steinhoff International NV to sweeten its offer for retailer Poundland Group plc.

More recently, buyout shops Bain and Cinven last month offered minority shareholders a marked up 74.40 euro per share for Stada Arzneimittel, after Elliott Management a 13% shareholder in the German drugmaker, said it wouldn't accept a lower price.  More recently, this month, Elliott increased its stake in Hitachi Kokusai, and KKR & Co. lifted its bid price for the Japanese group.

One of the fund's most intense European battles this year took place at AkzoNobel NV, a Dutch paint and specialty chemical business that Singer wanted to see sell itself to PPG Industries Inc. (PPG) . PPG had previously made three bids to acquire the business. The activist owns a 9.5% stake and in August reached a three-month settlement agreement with AkzoNobel after the company committed to a full separation of its specialty chemicals unit and agreed to nominate three new supervisory members in consultation with Elliott.

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However, the fund also has a more traditional activism strategy in Europe as well, as evidenced by its 2015 campaign and director battle at Alliance Trust, a U.K. investment manager. The firm settled with Elliott and overhauled its board and made changes to its business's processes under pressure from the activist fund.

Bernstein's Dibadj suggests that Elliott represents the future of activism because its strategy will be one that active managers, including global multi-strategy funds, will need to copy in order to differentiate themselves from index funds, which have themselves grown significantly in size in recent years. This may be a difficult transition for active managers, he added, because good investors don't necessarily have the communications and industry knowledge skills to be good activists.

"Elliott is an active manager who engages with companies around the world to improve their performance," Dibadj said. "How do you fight passive? You go the other way and engage with management teams. All active managers whether you are a hedge fund or long-only fund have to have an activist angle because that is one way to differentiate yourself from passive."

Clearly, Elliott Management, with its global approach to activist, has figured out that active isn't enough. Activist is the way to go. 

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Editors' pick: Originally published Oct. 16.

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