Why this country’s companies are at the greatest risk of shareholder activism in Europe

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UK-listed companies are expected to remain firmly in the sights of shareholder activists next year, as they seek to take advantage of the disruption caused by the COVID-19 pandemic to step up their campaigns in the country, according to a news report. research.

More than 60 UK businesses are expected to be at risk, up from 54 in December 2019, according to new search by Alvarez & Marsal on European Shareholder Activism, published Wednesday.

UK businesses have been hit harder than many of their European counterparts, creating greater opportunities for activists, with the country now accounting for 37% of all businesses at risk, the global professional services firm said in its sixth “A&M Activist Alert”. report.

“Following a reset of the battlefield for activist investors due to the pandemic, there will be renewed interest in UK targets until 2021,” the report’s authors said.

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“Despite a lull in activist campaigns during the first wave of COVID-19, the disruption of the business landscape means ‘crunchtime’ is fast approaching for many companies that have underperformed during the crisis,” said they added.

Several activist campaigns are already producing results. In November, investment manager Invesco announced it would expand its board of directors with three new members, including Trian fund management, after being pressured by the managing director of the activist fund, Nelson Peltz.

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Earlier this month, Countryside Properties CSP, a FTSE 250 listed developer,
+ 0.68%
bowed to demands from activist US investor Browning West, the company’s third-largest shareholder with a 9.4% stake – saying he would separate its housing construction activity for the rest of the group to focus on its social housing and private rental division. Its chairman, David Howell, will resign next year.

Technology, healthcare and industries will come under increasing attack, while consumer-focused businesses will continue to fall out of favor among activists, representing 25 planned targets, up from 32 in December 2019 and 43 in December 2018, according to the A&M report.

However, the damage caused by the COVID-19 pandemic to hospitality, physical retail and travel has left much of the industry “too deeply damaged to be of immediate interest to activist investors,” added A&M.

Malcolm McKenzie, managing director of A&M, said that before the pandemic hit, targeting by activists from mainland European companies was increasing rapidly, with investors becoming more confident and ambitious in their campaigns.

“But the COVID crisis has reconfigured the landscape of activism across Europe. In the face of the systemic shock, corporate performance has varied greatly, particularly in the UK which has created an attractive hunting ground for activists, exposing weaker companies which offer a compelling avenue for increasing shareholder value ” McKenzie added.

Meanwhile, the expected targeting of companies in continental Europe is stable year over year. Businesses in France and Germany are the main targets of activists looking outside the UK, with 25 companies in each country expected to be at risk. Next comes Scandinavia, where 15 companies are also at risk.

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In November, the shareholders of Europe’s largest shopping center owner Unibail-Rodamco URW,
+ 1.00%
rejected the company’s plans for a € 3.5 billion rights issue, following pressure from a consortium of activist shareholders including telecommunications billionaire Xavier Niel and former Unibail boss Leon Bressler , which together hold around 5% of the group.

The A&M analysis focuses on 1,601 companies with a market capitalization of $ 200 million or more, listed and based in countries such as UK, Germany, France, Scandinavia, Switzerland, Italy and Spain.

The research analyzed activist-investor approaches with 207 companies, then compared those companies to 1,394 that were not targeted to assess the likelihood of a campaign. Factors assessed include profitability, governance and equity value as well as country and business sectors.

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