Activist investor campaigns to increase in Europe

3 mins read

According to advisers speaking to Reuters, activist investors are anticipated to initiate more assertive and impactful campaigns to drive change within European companies in the upcoming year, building upon the unprecedented number recorded in 2023. Historically, Europe has been relatively inactive for activists due to strong ties between company management, local unions, governments, and significant investors, providing a level of protection. Disagreements were commonly resolved discreetly. However, a surge in investor activism is expected to lead to more resource-intensive and prolonged strategic conflicts, as traditional investors like Deka Investment join forces with corporate agitators such as Elliott Investment Management in openly advocating for significant transformations.

Andrew Brady, a director at SquareWell Partners, noted a shift in attitude, stating that active portfolio managers are now more inclined to exert pressure in Europe, a move previously considered drastic. Analysts, lawyers, and bankers observe that activists are exploring new territories and encountering frayed alliances in Europe. A survey by law firm Skadden Arps indicated that 60% of polled companies anticipate an increase in shareholder activism in Europe over the next 12 months.

Christopher Couvelier, head of European Shareholder Advisory at Lazard, commented on the diminishing stigma attached to U.S.-style activism, where investors deploy bold investment plans for impact. Lazard’s data unveiled a record-breaking 69 new campaigns launched against European targets in the past year, signifying a 15% rise from the previous record in 2022.

Darren Novak, head of shareholder engagement and M&A capital markets at JPMorgan, highlighted the formation of more funds focusing on mid-cap European companies and the adoption of traditional activist tools by institutional investors to instigate changes.

While the United Kingdom remains the most targeted, German companies experienced a significant increase, comprising 20% of all European campaigns in 2023, up from 8% in 2022. Notable campaigns involved Bayer AG and Brenntag. Activity also surged in Italy, constituting 10% of campaigns, compared to 2% the prior year. Conversely, France witnessed a decline, accounting for only 7% of campaigns in 2023, down from 18% the previous year.

The Skadden survey, conducted in collaboration with Activistmonitor, revealed that activists are likely to intensify efforts against management teams grappling with economic uncertainties and market challenges. Simon Toms, a partner at Skadden, emphasised that activists will continue seeking opportunities in Europe, with first-time activists anticipated to play a significant role, especially in the industrials and healthcare sectors.

Lazard’s data indicated an increased involvement of long-only investors in campaigns, reaching 14% in the past year, up from 12% between 2018 and 2022. Individuals, company founders, and family offices collectively accounted for 16%, compared to 11% in the preceding years.

While the United States remains the primary market for activist investors, recording 133 campaigns in 2023, Europe saw 69 campaigns, and the Asia Pacific region experienced 44. Despite the challenges, activists expressed optimism about the changing landscape in Europe, acknowledging a considerable agenda ahead.