Activist Investors Make Waves: In the ever-evolving landscape of corporate governance, a seismic shift is taking place in Europe as activist investors set their sights on initiating significant changes within companies. With a record-breaking number of campaigns in 2023, it is evident that activism is gaining traction and becoming a force to be reckoned with.
The targets of these activists are not only the management teams but also the economic challenges that many European companies face. What is even more intriguing is the increasing participation of long-only investors in this movement, signaling a shift in traditional investment strategies.
As we delve into the world of activist investors in Europe, it becomes imperative to compare and contrast their approach with that of the United States and Asia Pacific.
The question that arises is, what are the implications of this surge in activism and how will it reshape the corporate landscape in Europe?
Key Takeaways
- European companies are facing a significant rise in shareholder activism, with activists demanding substantial changes within the companies.
- There has been a record-breaking number of 69 new campaigns launched in 2023, a 15% increase from the previous year, with a focus on mid-cap European companies.
- Activists strategically target management teams and companies grappling with economic challenges, advocating for changes to enhance shareholder value and pushing for meaningful transformations.
- There is an increasing participation of long-only investors in activism campaigns, accounting for 14% of campaigns in 2023, challenging traditional notions of shareholder engagement.
Rise of Activism in European Companies: A Shift from Tradition
In a bold departure from tradition, European companies are experiencing a significant rise in shareholder activism, as activists, including traditional investors, assertively demand substantial changes within their ranks. Historically, Europe has been viewed as less vulnerable to shareholder activism due to the strong relationships between company management, local unions, and governments.
Also Read: Disney Faces Activist Storm: Peltzs Push for Change Gains Momentum
However, the landscape is evolving as activists become more assertive and the stigma associated with U.S.-style activism diminishes. This shift is particularly evident in the targeting of mid-cap European companies, marking a departure from the focus on large-cap companies that has been the norm.
As a result, the anticipation of more assertive campaigns for change within European companies is high for the coming year. This rise of activism signifies a significant departure from traditional practices and is reshaping the corporate landscape in Europe.
Record Number of Campaigns in 2023: Trends and Statistics
The surge in shareholder activism within European companies continues to gain momentum, with a record-breaking 69 new campaigns launched in 2023, marking a significant shift in the corporate landscape. This increase reflects a 15% rise from the previous year, indicating a growing appetite for change among investors.
Three notable trends and statistics emerge from this record-breaking year:
- Focus on mid-cap European companies: The establishment of more funds targeting mid-cap European companies has fueled the surge in activism. These companies are now attracting greater attention due to their potential for growth and value creation.
- Institutional investors embracing activism: Institutional investors are increasingly utilizing activist tools to propose strategic reviews and board nominations. This shift demonstrates a recognition of the potential benefits of activism in driving corporate change and value creation.
- Shift in geographic focus: Germany has witnessed a significant increase in activism, accounting for 20% of all European campaigns in 2023, up from 8% the previous year. In contrast, France experienced a decline to 7%, while Italy saw a rise to 10%. These divergent trends reflect varying levels of receptiveness to shareholder activism across European countries.
Activists’ Targets: Management Teams and Economic Challenges
Activists are poised to strategically target management teams grappling with economic challenges and navigating an unpredictable business environment in the coming year. With first-time activists gaining prominence, particularly in Europe’s industrials and healthcare sectors, the stage is set for a surge in corporate overhauls.
Despite the European landscape being perceived as more challenging than that of the United States, changing dynamics are presenting activists with ample opportunities. The heightened focus on management teams reflects a recognition of their pivotal role in driving organizational performance and addressing economic headwinds.
These activists are likely to exploit vulnerabilities within management ranks, advocating for changes that enhance shareholder value and promote long-term sustainability. As they take aim at businesses navigating uncertain times, activists are poised to disrupt the status quo and push for meaningful transformations.
Increasing Participation of Long-Only Investors: Shifting Trends
Notably, a shift in trends is occurring with the increasing participation of long-only investors in activism campaigns. According to the paper, long-only investors accounted for 14% of campaigns in 2023, a significant rise from the previous period’s 12%. This indicates a growing interest among long-only investors in advocating for corporate change and highlights their willingness to actively engage in activism strategies.
In addition, the involvement of individuals, company founders, and family offices increased to 16%, up from 11% between 2018 and 2022. This surge in diverse activist participants reflects the evolving dynamics of corporate governance and suggests a broader recognition of the potential impact that long-only investors can have in driving corporate overhaul.
The increasing participation of long-only investors brings new perspectives, resources, and influence to the activism landscape, challenging traditional notions of shareholder engagement.
Global Comparison: Activism in Europe, the U.S., and Asia Pacific
With a record-breaking 69 campaigns in Europe in 2023, the landscape of activism is experiencing a notable shift, presenting increased opportunities for activist investors.
However, when compared globally, Europe still lags behind the United States in terms of activism. The U.S. recorded a higher count of 133 campaigns, indicating a more robust activist culture.
Meanwhile, the Asia Pacific region recorded 44 campaigns, showcasing a growing interest in activist strategies. This global comparison highlights the varying levels of activism across different regions, with the U.S. leading the way.
As economic uncertainties persist, activists are expected to adopt a more aggressive approach in targeting management teams. This trend signifies the evolving nature of activism and the potential for further growth in Europe and other regions.
Conclusion Of Activist Investors Make Waves
The surge of activist investors in Europe signals a significant shift from traditional corporate practices. With a record number of campaigns in 2023, these activists are targeting management teams and addressing economic challenges.
Furthermore, the increasing participation of long-only investors indicates changing trends in activism. When compared globally, activism in Europe stands out as a bold and provocative force for corporate overhaul.
Our Reader’s Queries
What are the tactics used by activist investors?
Activist investors have a range of tactics at their disposal. These include public campaigns, proxy fights, negotiation with management, and shareholder resolutions. Each approach has its own strengths and weaknesses, and the choice of tactic will depend on the specific circumstances of the situation. By utilizing these tactics, activist investors can exert pressure on companies to make changes that align with their interests.
What does an activist investor do?
An activist investor is a specialized hedge fund that purchases a significant minority stake in a publicly traded company with the intention of altering its management. This approach is often used to bring about changes in the way the company is run.
How do activist investors create value?
Their strategy is straightforward: Identify undervalued stocks and push management to take actions that will increase their value. This may include returning more cash to shareholders or divesting underperforming divisions. By applying pressure, they aim to drive up the stock price and generate returns for themselves and other investors.
Who are the most notorious activist investors?
Some of the most prominent activist investors in history include Isaac Le Maire, who lived from 1558 to 1624. More recently, well-known names in the field include Carl Icahn, Nelson Peltz of Trian Partners, Bill Ackman of Pershing Square, and Daniel Loeb of Third Point Management. Other notable figures include Barry Rosenstein, Larry Robbins of Glenview, David Einhorn, Gregg Hymowitz of EnTrust Global, Christer Gardell of Cevian Capital, and Ryan Cohen. These individuals have made a name for themselves by using their influence to push for change within the companies they invest in.