Activist investors’ sights set on corporate Europe 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.

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 per cent 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 per cent increase from 2022, which was also a record, data from Lazard published on Monday showed.

“More funds are being formed that are being 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.”

While ‘UK Plc’ remains the most targeted, German companies saw a huge increase at 20 per cent of all European campaigns last year, up from only 8 per cent in 2022.

Bluebell Capital Partners and Inclusive Capital Partners took aim at pharmaceutical and biotech giant Bayer AG, while PrimeStone Capital and Engine Capital battled with chemical group Brenntag in 2023.

Activity also increased in Italy where 10 per cent of all campaigns took place, up from 2 per cent in the previous year.

France saw the sharpest drop with only 7 per cent of all campaigns in 2023, after 18 per cent 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.

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 per cent of last year’s campaigns, up from 12 per cent between 2018 and 2022, while individuals, founders of companies and family offices accounted for 16 per cent, compared with 11 per cent between 2018 and 2022.

The U.S. remains the biggest market for activist investors, with 133 campaigns in 2023, compared with Europe in 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.