Third Point took 7% of Baxter, got a board seat, and Baxter's margins recovered

In August 2015 Third Point, Daniel Loeb's hedge fund, disclosed a stake of nearly 7% in Baxter International worth almost $2 billion, making it the medical-products company's largest shareholder. Baxter had just spun off its biopharma arm as Baxalta, and its remaining hospital business was shrinking: revenue fell 6% to $3.9 billion in the June 2015 quarter and management forecast a 9% adjusted operating margin for the second half, well below peers.

Loeb publicly asked for two board seats and a say in choosing the next CEO, since longtime chief Robert Parkinson had already started a search for his successor. Within two months Baxter settled: it expanded the board to 12 and seated Third Point partner Munib Islam, who joined both the audit committee and the CEO search group, with a second mutually agreed outsider to follow.

The search produced Jose Almeida, formerly of Covidien, who took over in January 2016. Almeida cut costs, pruned the portfolio and pushed Baxter's operating margin from single digits toward the high teens, and the stock more than doubled from its 2015 levels within three years. Third Point, which bought in around $32-40 a share, exited profitably.

Baxter's operating margin rose from about 9% toward the high teens and the stock climbed from ~$33 in 2015 past $70 by 2018.

Baxter's post-spinoff margins lagged peers badly, giving the activist a clear, measurable thesis.

The incumbent CEO was already retiring, so the board could grant influence without a public humiliation.

Third Point settled for one seat plus a mutually agreed second, trading confrontation for speed.

The new CEO executed the margin plan the activist had outlined, validating the thesis in the market.

A cooperative board seat plus a say in the CEO search can deliver most of what a proxy fight promises, at a fraction of the cost and acrimony.

Under Almeida Baxter delivered several years of margin expansion and earnings growth, and its shares roughly doubled between the 2015 settlement and 2018. Third Point sold down its stake at a large profit. Baxter later used its stronger cash flow to buy Hill-Rom for $10.5 billion in 2021.