Activist investors turn to European companies after record year By Reuters

© Reuters. File photo: A June 26, 2023 view showing skyscraper office buildings in the La Défense business and financial district near Paris, France. REUTERS/Stephanie Lecocq/File Photo

Author: Svea Herbst-Bayliss and Anousha Sakoui

NEW YORK/LONDON (Reuters) – Activist investors are expected to launch more and bolder campaigns for change among European companies in the year ahead after hitting record numbers in 2023, advisers told Reuters.

Europe has been a laggard for activists for years. That’s because the company’s management had closer ties to local unions, sometimes governments, and large investors than in other parts of the world, which gave activists more protection.

Disagreements were often resolved privately.

But the rise in investor activism could force more costly and time-consuming strategic confrontations as traditional investors like Deka Investment join corporate agitators like Elliott Investment Management in publicly demanding big changes.

“In the past, investors in Europe have been reluctant to make demands that are too bold,” said Andrew Brady, a director at SquareWell Partners who advises companies and activists.

“But now active portfolio managers are more willing to put pressure on Europe,” he added.

Activists are seeking new frontiers and finding that some of Europe’s old alliances are falling apart, analysts, lawyers and bankers said. A survey by law firm Skadden Arps published on Monday found that 60% of companies surveyed expect shareholder activism to increase in Europe over the next 12 months.

“Some of the stigma around American-style activism, where investors rely on ‘shock and awe’ through large-scale investment schemes, has disappeared,” said Christopher Couvelier, head of European shareholder advisory at Lazard (NYSE:).

A record 69 new campaigns were launched in Europe last year, a 15% increase over 2022, according to data from Lazard released on Monday.

“More funds are being formed that focus on European mid-cap companies,” said Darren Novak, head of shareholder engagement and M&A capital markets for Europe, Middle East and Africa at JPMorgan.

“We are also seeing more institutional investors using traditional activist tools to effect change in companies, such as proposing strategic reviews and even appointing board members.”

While ‘UK Plc’ remains the most targeted, German companies have increased significantly from just 8% in 2022 to 20% of all European campaigns last year.

‘There’s a lot to do’

Bluebell Capital Partners and Inclusive Capital Partners have targeted pharmaceutical and biotech giants. Bayer AG (ETR:), PrimeStone Capital and Engine Capital are locked in a battle with chemicals group Brenntag in 2023.

Activity also increased in Italy, where 10% of all campaigns took place. This is an increase from 2% the previous year.

France saw the steepest decline, at 7% of all campaigns in 2023, compared to 18% the previous year.

A Skadden survey conducted in conjunction with Activistmonitor found that activists are ready to become more aggressive in their attacks on executives struggling to deal with unpredictable economic environments and market headwinds.

“Activists will continue to seek out these opportunities in Europe,” said Simon Toms, partner at Skadden.

Novice actors are expected to make up a growing proportion of those pushing for change, including in Europe’s industrial and healthcare sectors.

Long-term investors’ participation in last year’s campaigns increased from 12% to 14% between 2018 and 2022, with individuals, company founders and family offices accounting for 16%, according to data from Lazard. It was 11%.

The United States remains the largest market for activist investors, with 133 campaigns in 2023. By comparison, there are 69 in Europe and 44 in the Asia Pacific region.

“The environment in Europe may be a little more difficult, but things are changing and there is a lot of work to be done,” said one activist.