Activist investors are expected to launch more and bolder campaigns for change at European companies next year, advisers told Reuters, after a record number in 2023.
For years, Europe was something of a haven for activists, as a company’s management often had closer relationships with local unions, sometimes with governments and often with major investors than in other parts of the world, giving them more protection.
Disagreements were often resolved behind closed doors.
However, increasing investor activism could lead to costly and time-consuming strategic battles if traditional investors like Deka Investment join agitators from companies like Elliott Investment Management and openly demand major change.
“In the past, investors in Europe have shied away from demanding something so drastic,” said Andrew Brady, a director at SquareWell Partners who advises companies and activists.
“But now active portfolio managers are more willing to apply pressure in Europe,” he added.
Activists are looking for new avenues and are noticing that some old alliances in Europe are fraying, analysts, lawyers and bankers said. A survey published on Monday by law firm Skadden Arps found that 60% of companies surveyed expect shareholder activism to increase in Europe over the next 12 months.
“The stigma attached to U.S.-style activism, where investors sometimes rely on ‘shock and awe’ with big investment plans, has somewhat dissipated,” said Christopher Couvelier, who heads European shareholder advisory at Lazard.
A record 69 new campaigns were launched across European companies last year, up 15% from 2022, which was also a record, Lazard data released on Monday shows.
“More funds are being created that focus on European mid-cap companies,” said Darren Novak, who leads shareholder engagement and M&A capital markets in Europe, the Middle East and Africa at JPMorgan.
“We are also seeing more institutional investors using the tools of traditional activists to effect change at companies, for example by proposing strategic reviews and even board nominations.”
While ‘UK Plc’ remains the most targeted, German companies have seen a huge increase with 20% of all European campaigns last year, up from just 8% in 2022.
‘A LOT TO DO’
Bluebell Capital Partners and Inclusive Capital Partners targeted pharmaceutical and biotech giant Bayer AG, while PrimeStone Capital and Engine Capital battled chemical giant Brenntag in 2023.
Activity also increased in Italy: 10% of all campaigns took place there, compared to 2% the previous year.
France saw the biggest decline, with just 7% of all campaigns in 2023, down from 18% the year before.
Activists appear poised to more aggressively target management teams struggling with an unpredictable economic environment and market headwinds, according to results of the Skadden survey conducted in collaboration with Activistmonitor.
“Activists will continue to hunt for such opportunities in Europe,” said Skadden partner Simon Toms.
A growing proportion of activists pushing for change for the first time are also expected to work in Europe’s industrial and health sectors.
Lazard data shows that long-only investors were involved in 14% of last year’s campaigns, up from 12% between 2018 and 2022, while individuals, company founders and family offices accounted for 16%, up from 11% between 2018 and 2022.
The US remains the largest market for activist investors, with 133 campaigns in 2023, compared to Europe (69) and Asia Pacific (44).
“The environment may be a little more difficult in Europe, but things are changing and there is a lot to do,” said one activist. (Reporting by Svea Herbst-Bayliss and Anousha Sakoui; Editing by Alexander Smith)
2024-01-08 19:44:06
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