When stock markets are buoyant, shareholder activists tend to fade into the background. In 2023, a year that saw a 26% gain in the S&P 500 and a 43% advance in the tech-laden Nasdaq, the U.S. experienced a 13% decline in activist campaigns. That is a sharp contrast from the three-year high of 240 campaigns that occurred in 2022, when markets underperformed.

Soaring price-to-earnings multiples have quieted the critics, but not entirely. Take a closer look and some interesting trends emerge. While classic boardroom raiders such as Carl Icahn and Nelson Peltz—both in their 80s and going strong—remain formidable, a new wave of activists has also emerged, disrupting the status quo with different priorities and tactics.

One noteworthy shift is the changing target size of companies. In 2023, 59% of activist campaigns targeted companies under $1 billion, marking the highest level since 2016. This trend signifies a departure from the previous focus on large, mega-cap companies, indicating an opportunistic shift toward the mid-market.

Then there’s the increasing popularity of the Universal Proxy Card (UPC), a corporate governance innovation and a new tool for shareholder activists. Traditionally, when shareholders have chosen to vote by proxy at shareholder and special meetings, they have often faced a binary choice.

They were typically presented with respective slates of board nominees, one from the company’s management and another from dissident shareholders on separate proxy cards, potentially limiting their choices.

In the era of UPC, shareholders are presented with a comprehensive list of candidates on one unified proxy card, giving shareholders the option to mix and match candidates. Investors can now cast their votes for a combination of director nominees and are no longer forced to pick one slate over another.

Interestingly, the introduction of UPC has not yet led to a big uptick in board challenges. In fact, activist board seat win rates remain consistent with historical averages, albeit with a rise in settlements. An early takeaway is that the introduction of UPCs may ultimately streamline the path to settlements, mitigating the need for protracted proxy battles.

Middle market companies would be wise to watch these trends. The ease afforded by UPC in gaining board representation means that they may be more susceptible to activist targeting. Furthermore, mid-cap companies often find themselves less prepared (and with more limited resources to defend themselves) when an activist starts knocking on their door.

Recognizing this, it is imperative that companies arm themselves accordingly, starting with an annual review of any areas of vulnerability and an up-to-date strategic plan (often prepared in coordination with financial advisors) to preempt any interlopers who may think they know best when it comes to driving the future growth and profitability of your company.

Jeff Jacobs is a partner and head of M&A and head of the Fairness Committee at Solomon Partners. He has over 24 years of experience advising clients on mergers, acquisitions and divestitures.