Activist investors set sights on European companies after record year
Activist investors are expected to launch more and bolder campaigns for change among European companies in the year ahead, advisers told Reuters, after a record number in 2023.
Europe was for years something of a backwater for activists as a company’s management often had closer ties with local unions, sometimes with governments and often with big investors, than in other parts of the world, giving them more protection.
Disagreements were often hashed out behind closed doors.
But growing investor activism could force more costly and time-consuming strategic stand-offs as traditional investors, such as Deka Investment, join corporate agitators like Elliott Investment Management in openly demanding major changes.
“In the past, investors in Europe shied away from calling for something so drastic,” said Andrew Brady, who advises companies and activists as a director at SquareWell Partners.
“But now active portfolio managers are more willing to apply pressure in Europe,” he added.
Growing investor activism in Europe could lead to strategic stand-offs
Activists are seeking new frontiers and finding some old alliances in Europe are fraying, analysts, lawyers, and bankers said. A survey from law firm Skadden Arps released on Monday found that 60% of polled companies expect shareholder activism in Europe to increase over the coming 12 months.
“The stigma that has been attached to U.S. style activism where investors sometimes rely on ‘shock and awe’ with big investment plans, has dissipated some,” said Christopher Couvelier, who heads European Shareholder Advisory at Lazard.
A record 69 new campaigns were launched at European targets last year, representing a 15% increase from 2022, which was also a record, data from Lazard published on Monday showed.
“More funds are being formed that are focused on mid-cap European companies,” said Darren Novak, who heads shareholder engagement and M&A capital markets in Europe Middle East and Africa at JPMorgan.
“We are also seeing more institutional investors use tools of traditional activists to make changes at companies such as proposing strategic reviews and even board nominations.”
European companies expected to face more pressure for major changes
While ‘UK Plc’ remains the most targeted, German companies saw a huge increase at 20% of all European campaigns last year, up from only 8% in 2022.
Bluebell Capital Partners and Inclusive Capital Partners took aim at pharmaceutical and biotech giant Bayer AG (ETR:), while PrimeStone Capital and Engine Capital battled with chemical group Brenntag in 2023.
Activity also increased in Italy where 10% of all campaigns took place, up from 2% in the previous year.
France saw the sharpest drop with only 7% of all campaigns in 2023, after 18% the year before.
Activists appear ready to pounce more aggressively on management teams struggling to handle an unpredictable economic environment and market headwinds, the Skadden survey, conducted in collaboration with Activistmonitor, found.
“Activists will continue to be on the hunt for these opportunities in Europe,” said Skadden partner Simon Toms.
Survey shows increase in shareholder activism in Europe
First-time activists are expected to make up a growing portion of those pushing for changes, including in Europe’s industrials and healthcare sectors.
Lazard’s data showed long-only investors were involved in 14% of last year’s campaigns, up from 12% between 2018 and 2022, while individuals, founders of companies, and family offices accounted for 16%, compared with 11% between 2018 and 2022.
The U.S. remains the biggest market for activist investors, with 133 campaigns in 2023, compared with Europe at 69 and the Asia Pacific region at 44.
“The environment might be a little tougher in Europe, but things are changing, and there is a lot to do,” said one activist.
Record number of campaigns launched at European targets in 2023
A record 69 new campaigns were launched at European targets in 2023, representing a 15% increase from 2022, which was also a record, according to data from Lazard. This surge in activity indicates a growing trend of investor activism in Europe, driven by a desire for change and more assertive strategies.
In the past, Europe has been less receptive to activist investors due to closer ties between management and unions, governments, and major investors. However, as traditional investors like Deka Investment join forces with corporate agitators such as Elliott Investment Management, the landscape is changing. Investors are becoming more willing to apply pressure and demand major changes within European companies.
Germany saw a significant increase in activism, with German companies representing 20% of all European campaigns in 2023, up from 8% the previous year. Italy also experienced a notable rise in activism, accounting for 10% of all campaigns. In contrast, France witnessed a decline, with only 7% of campaigns compared to 18% the year before.
The Skadden survey, conducted in collaboration with Activistmonitor, found that activists are targeting management teams struggling to navigate an unpredictable economic environment and market challenges. This trend is expected to continue, with first-time activists playing a more prominent role, particularly in Europe’s industrials and healthcare sectors.
Although the U.S. remains the primary market for activist investors, Europe is steadily catching up. The increase in shareholder activism indicates a shift in attitudes and a willingness to challenge the status quo. While it might be a little tougher in Europe, the changing environment suggests there is much work to be done.
Analyst comment
Positive news. Analysts predict that the market will experience more investor activism in European companies as record numbers of campaigns were launched in 2023, indicating a growing trend. Traditional investors are joining forces with corporate agitators, demanding major changes. Germany and Italy saw a significant increase in activism, while France experienced a decline. Activists are targeting struggling management teams, and first-time activists are expected to play a bigger role. Although the U.S. remains the primary market, Europe is catching up, indicating a changing environment and an opportunity for growth.
