There are early signs that European activism is emerging from the COVID-19 lockdown, with some activists already deploying money and others putting pressure on their existing targets.
The Quietest Year In European Activism
The numbers are still way below recent years. According to Activist Insight Online data, 58 European companies, including those from the U.K., have been publicly subjected to activist demands as of June 15, versus 100 in the same period last year, and 107 in 2018. By all measures, 2020 so far is the quietest year in European activism since 2014.
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Yet the second half of the year is expected to be busier. An investment banker told me this week that activists are analyzing companies and engaging behind the scenes. After years of being ignored by U.S. activists, the European small- and-mid-cap space is finally becoming attractive to them. The target universe may have become smaller, given the disproportionate impact of COVID-19 on certain sectors, but those that remain are more appealing than ever, the banker says. Lower valuations, plenty of dry powder at private equity firms, low interest rates, and pressure on some companies to consolidate could open new opportunities for activists.
For now, the M&A market remains closed, with activists waiting for it to reopen before pushing for deals, which typically make up around a fifth of all demands in Europe. But some activists are already deploying capital, particularly those with a long-term investment horizon. This month, Sweden-based Cevian Capital invested in publishing and education company Pearson and indicated it wanted a say in the appointment of a new CEO. Meanwhile, Sachem Head Capital also unveiled a stake in security company G4S. In April, Teleios Capital Partners took a large stake in German springs and dampers manufacturer Stabilus, and Impactive Capital acquired a stake in small-cap payment solutions provider Equiniti Group, the activist’s first foray in Europe since launch in 2018.
Whether due to loss of patience or time pressure, this month has already seen activists act on their existing campaigns. CIAM called for a strategic review ahead of Scor’s annual meeting, and praised the firm after it announced long overdue succession planning for CEO and Chairman Denis Kessler. U.S. private equity firm Cerberus Capital lost patience with German lender Commerzbank and demanded board seats. As the bank refused, the stage might be set for a protracted battle. Elliott Management wrote a public letter to Dutch insurer NN - its first action since COVID-19 erupted – asking for improved efficiency and an overhaul of its investment portfolio, shortly after the annual meeting.
Elsewhere In The News
This week’s in-depth story examines how the COVID-19 pandemic has affected turnover in the boardroom.
Broadway Financial rejected the nominee advanced by The Capital Corps, saying the activist was not a shareholder at the record date of the annual meeting.
Dalton Investments lost its proxy contest at Shinsei Bank after shareholders re-elected all incumbent directors.
Starboard Value’s Peter Feld resigned from the board of AECOM following "strong disagreements" over the CEO selection process.
Neuberger Berman tapped Caitlin McSherry as director of its ESG team from State Street Global Advisors.
Deutsche Lufthansa appealed to shareholders for support of its proposed 9 billion euros government bailout after its largest shareholder, Heinz-Hermann Thiele, criticized the terms of the deal.
Destination XL announced its chairman and two directors will not stand for re-election amid a withhold campaign by Cannell Capital.
Institutional Shareholder Services (ISS) partially backed the dissident slate advanced by Privet Fund Management and UPG Enterprises at Synalloy.
Railroad Ranch Capital voiced frustration at the influence of minority shareholder Kaisa Group over Nam Tai Property.
As always, Activist Insight Online reporters will be diligently covering all developments in activism around the world, and Iuri Struta will be highlighting the most remarkable stories in this roundup. If you have suggestions for improving our coverage, or a tip, you can contact us at [email protected].