A lot of banks advise boards on defending against activist investors. I'm curious, if the goal of an activist investor is to unlock shareholder value, why do companies pay advisors to fight them? By paying fees to do so, isn't this essentially acting against the best interests of the shareholders?
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Common misconception that activists are always acting on behalf of all shareholders. They are acting on behalf of only themselves and to make a return. I've seen situations where activists were pushing for action that would be detrimental to shareholders in the mid/long-term. I've seen situations where activists pushed for a different (better) return profile for themselves vs common shareholders. I've seen situations where it was probably a good thing that an activist jumped in. Ultimately, activists are generally opportunistic investors that seek to generate returns sooner rather than later where they can make an argument for underperformance. This underperformance can be temporary, situational or structural. Activists are most helpful when there are structural issues causing underperformance and there is an ineffective governance structure to enact change. If the rest of the shareholder base happens to benefit from the activist's actions as well, great (also makes it easier to fight those proxy battles). If long-term shareholders lose but the activist gains, they don't care either.
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