Activist investors now targeting both large and mid caps as 2015 set to become record year for shareholder activism activity
- Globally, 860 shareholder activist actions have been launched so far this year – an increase of 170% since 2011
- Europe continues to be an increasing focus for activists with a 126% increase in activist actions since 2010
- UK is primary focus for activists in Europe. But France, Austria, Switzerland and Ireland all have seen multiple activist actions in 2015
- Large and mid cap companies are at most at risk from an activist approach
- Activists continue to target a more diverse range of companies across Europe – now evenly spread across tech (13%), commodities (19%), services (23%) and financial (30%). Whereas in 2011 it was predominantly financial (49%) and services (27%)
- Seeking boardroom representation continues to be the most popular tactic among activists, accounting for 50% of all campaigns in the UK in 2015
An increasing number of publicly active activists with ever-deeper pockets, combined with attractively priced corporates sitting on large cash piles, is leading to a ‘perfect storm’ of shareholder activism activity in Europe, according to new research by Linklaters, the international law firm.
Over the past five years, the number of publicly active activists has grown by 163% from 119 in 2010 to 314 in Q3 2015. Similarly, the funds available to activist investors have grown 153% over the same period to $120bn worth of assets under management.
This is leading to increased activist activity. Globally, activist shareholders have already launched 860 actions in the first nine months to the end of September, putting 2015 on track for a record year. This compares with a total of 907 in the whole of 2014 and 795 in 2013.
The focus of activist activity continues to be in the US, with a 289% increase in activist actions in 2015 compared with 2010. However, with European companies sitting on €2.1tn in cash and attractively priced compared with companies in the US, they are also being increasingly targeted, and the region has seen a 126% increase in activity over the same period.
Activists in Europe are also targeting ever larger companies. Across Europe, the share of actions targeting European companies with a market cap of more than $1bn has risen from 15% in 2010 to 50% in Q3 2015.
Most activity in Europe has been centred on companies in the UK, which has so far seen 32 actions in 2015. However, companies in France (13), Austria (11), Switzerland (9) and Ireland (7) all have seen an increasing number of activist actions this year.
Charlie Jacobs, M&A partner at Linklaters, says:
“US activists are clearly adjusting their strategies to look toward Europe. Some of this focus can be attributed to a perceived undervaluation of companies that can then be used as a cheap entry point. Equally, with noise of a Euro crisis slowing down and M&A taking off, activists are exploiting those shareholders that are becoming less tolerant to underperformance.”
Activists also continue to target a more diverse range of industries across Europe. Whereas in 2011 targets were predominantly in the financial (49%) and services (27%) sectors, 2015 has shown a much more even spread across the full range of sectors, including financial (30%), services (23%), commodities (19%), technology (13%), healthcare (3%).
According to the research, effecting boardroom change continues to be the major focus for activists. In the UK, 47% activist actions in Q3 2015 have been focused on gaining board representation and a further 16% was focused on removing the CEO or another boardroom member.
Jacobs says that: “whilst the US activists are becoming more familiar with European regulatory regimes and corporate governance features, corporates are becoming better prepared through constant reviews of their business strategies and vulnerabilities as well as asking themselves the question of where they can unlock further value.”
For further information please contact Rupert Winlaw on +44 (0)20 7456 3219
The research is based on Activist Insight data on shareholder activism trends worldwide. Activist Insight obtains its data from a number of sources: including regulatory filings at various security exchanges worldwide; telephone interviews and electronic communication with (and direct contributions from) activist investors; intermediary service providers; issuers and institutional investors; web research; proprietary data analysis; and public pension funds in both the US and UK.