Partner & Managing Director, New York
AlixPartners expects the trend of shareholder activism in the UK and abroad to continue as investor dry-powder grows and activists become increasingly sophisticated.
London – The last 12 months have seen a continuation of the trend of increasing shareholder activism in the UK and elsewhere. This is a trend that AlixPartners expects to continue as investor dry-powder grows and activists become increasingly sophisticated. Interestingly, the size of the companies they are targeting is also increasing - since the start of 2017, the average revenue of the companies being targeted has increased by almost 59%, indicating that larger companies are no longer safe from activist intervention as recent actions involving Unilever and BHP Billiton demonstrate.
A recent analysis by AlixPartners, the global business advisory firm, of 40 recent cases of activist shareholders’ interventions within Europe has identified common levers that activists are looking at to drive shareholder value. Ultimately, public company Boards and activist investors are aligned in wanting to maximise shareholder value, but to guard against becoming a target, public company Boards and Executive teams need to urgently review their businesses more self-critically. After all, the best defence against becoming a target is to deliver shareholder value.
From its analysis, AlixPartners has compiled a checklist of key areas that companies can use to focus any self-review based on the most common levers that activists target during their campaigns:
Analysis of companies that are typically vulnerable to activist campaigns finds similarities, including a mix of high and low growth business units and sustained underperformance relative to their peers. Often this is driven by disruption in the market, and it is therefore unsurprising that since the start of 2016 more than half of the selected activist deals have been in the Oil & Gas, Retail, TMT and Metals & Mining sectors.
Eric Benedict, Managing Director and UK lead at AlixPartners said: “The growth in shareholder activism, and the depth of information available to investors, emphasises the need for companies to act now. The recurring trait we see in these approaches is value creation. Which is why it’s not enough to act once the activist has knocked at the door. AlixPartners’ analysis of recent cases show that the reality is that almost 80% of changes tabled by activists end up being approved by shareholders.
“We believe that we are uniquely qualified to support management teams and boards who wish to understand the way that these new sophisticated investors prepare and execute their investment thinking - because through our extensive experience over the last twenty years working with value investors we can bring a financial investor mind-set to a public company situation.”
Graeme Smith, Managing Director and EMEA co-lead of Investigations, Disputes & Risk at AlixPartners said: “As with many things in business life, the increasing trend of shareholder activism is an import from the US. This trend is likely to continue as financial investors have increasing levels of capital to deploy in investment markets and public equity markets have the advantage of being both large and liquid. Activists are no longer only thought of as “corporate raiders” as in the past, but as keen, analysis driven sophisticated investors who are looking to take advantage of the sense that traditional shareholders have not been doing enough to hold Boards to account for underperformance.
“Whilst the intervention of an activist investor can be perceived as a distraction by Boards, the common levers they focus on are entirely rational and provide a good sense-check for Boards. In the end, a well-run company that is delivering shareholder value is unlikely to represent a profitable target for an activist campaign.”
In today’s fast paced global market timing is everything. You want to protect, grow or transform your business. To meet these challenges we offer clients small teams of highly qualified experts with profound sector and operational insight. Our clients include corporate boards and management, law firms, investment banks, investors and others who appreciate the candor, dedication, and transformative expertise of our teams. We will ensure insight drives action at that exact moment that is critical for success. When it really matters.
+44 (0)20 7680 6550