The following is a guest post from Ron Orsini, managing director at Alvarez & Marsal. Opinions are the author’s own.
Activist investors are pushing more companies toward breakups and forced sales at a pace not seen in years, but the trigger is consistent: Sustained operational underperformance relative to peers.
Global activism campaigns reached record levels in 2025, and demands for sales or breakups appeared in roughly one-third of those situations. Companies that want to avoid this growing pressure need to examine their own performance through the same analytical lens activists use and address operational gaps before outside investors do it for them.
When activism pushes toward transactions
The surge in activism reflects a simple pattern: Investors focus on companies whose financial performance lags behind peers. When businesses struggle to generate competitive growth and margins, activists begin asking whether the existing structure is suppressing value. Recent airline campaigns illustrate the point, with persistent investor scrutiny after sustained margin underperformance.
In many instances, mergers and acquisitions become the blunt instrument used to address those concerns. A breakup or sale can create an immediate premium for shareholders and a clear outcome that markets understand. Activists know how powerful that narrative can be. Once it gains traction among investors, boards struggle to pivot the conversation back to operational improvement — particularly without a credible, time-bound plan to close performance gaps.
The environment has made these dynamics more powerful. Regulatory shifts have opened the door to more M&A activity, and rising foreign investment has expanded the pool of potential buyers. When there are more paths to a transaction, activists gain leverage. A record number of campaigns in 2025 led to more CEO departures, more board seats won, and a growing share of deals ending in a sale or breakup.
The best defense begins well before an activist appears by identifying and closing performance gaps before investors do. Leadership teams should regularly evaluate their businesses using the same methods activists employ. A disciplined outside-in analysis allows management to identify vulnerabilities early and close the performance gaps that attract activist attention.
Three areas are critical:
1. External benchmarking: Activists typically begin by reviewing growth rates, operating margins, return on invested capital, inventory turns and working-capital efficiency relative to comparable companies. These metrics offer a quick signal of whether a business is delivering competitive results.
2. Internal benchmarking: Many diversified companies contain divisions that perform exceptionally well alongside others that struggle. The strongest business units often demonstrate practices that can be replicated elsewhere. Examining how those internal leaders manage pricing, supply chains, customer relationships and support costs can reveal opportunities for improvement.
3. Operational practices vs. best-in-class operators: Companies that lag in automation, digital capabilities or process discipline often carry unnecessary cost and complexity. Improvements in pricing, customer segmentation, supply chain coordination and working capital management can unlock significant value without major structural changes. For many companies, these levers add up to more value than a one-time transaction premium.
From analysis to a credible value-creation plan
This “outside in” analysis forms the foundation for a credible value-creation plan. Investors want clear evidence that leadership understands where performance gaps exist and has a roadmap for closing them. That roadmap should focus on measurable operational improvements rather than abstract strategic aspirations.
Recently, an established media and entertainment company expanded aggressively into new platforms. As losses continued and capital requirements increased, investors demanded clearer accountability, milestones, and reinvestment discipline. Management recalibrated the growth strategy to focus on margin improvement, capital efficiency, and measurable business economics — shifting investor scrutiny toward profitability and returns as activists focused on new platform losses, cost structure and capital allocation.
A company’s board plays a critical role in ensuring discipline. Management teams often present ambitious transformation strategies that promise meaningful results several years into the future. Investors place greater weight on early indicators of progress. Operational improvement plans should include milestones that demonstrate near-term traction, supported by the same financial and operational metrics investors watch — growth, profitability, returns on invested capital and working-capital efficiency.
Boards should embed rigorous performance reviews into the strategic planning cycle rather than treating them as a defensive exercise triggered by activist pressure. Addressing potential weaknesses before outside investors raise them preserves strategic flexibility and strengthens credibility with shareholders.
Control the narrative through performance
This sort of disciplined, operational plan offers a more durable path than the strategic review companies so often launch to explore possible transactions. While these announcements are intended to signal responsiveness, most strategic reviews fail to produce transactions; two-thirds of companies that announce a public review receive no viable offer within a year, and the resulting uncertainty around outcomes and timing often puts pressure on share prices. The process can also reshape the shareholder base, pushing out long-term investors and drawing in short-term arbitrage traders.
Instead, a plan that demonstrates a clear understanding of the company’s challenges and presents a credible plan for improving performance reinforces confidence by demonstrating progress against defined milestones.
Activists play an important role in corporate governance by identifying inefficiencies and pushing companies to improve, which is why leadership teams should keep an activist lens embedded in their planning processes. Understanding where they stand relative to peers enables companies to stay ahead of investors, rather than allowing an activist narrative to define the company’s future.
Breakups may deliver a quick premium, but companies that close performance gaps early with a credible value plan retain control of their strategy and compound value over time.
