Activist campaigns increase every month of 2023 so far, reaching 25 in May

More environmental campaigns against corporates than ever before

Demands for operational improvements grow as M&A remains subdued

London, 4 July 2023 – Global professional services firm Alvarez & Marsal (“A&M”) has released the findings of its latest analysis and predictor of shareholder activism in Europe for the next 18 months, the “A&M Activist Alert” (“AAA”).

Analysis of the year so far shows that the number of activist campaigns has steadily increased month-on-month since January, bucking the trend of previous years and indicating that momentum for activism is building. In May, there were 25 campaigns launched across Europe, more than double the number in January (12). For the first time, there are more than 100 funds adopting activist tactics in Europe – A&M tracks all major funds who have launched activist campaigns over the past 18 months.

The UK remains the top market for activist activity, followed by Germany, with 24 and 21 campaigns respectively so far this year. There have been more environmental campaigns than ever before in 2023, with 17 in total. These account for 12% of all activist campaigns, compared to just 4% in 2019. We have also seen a reduction in M&A-related demands, down to 11% of total campaigns against an average of 20% in the previous four years, owing to a subdued deals market. Instead, activists are increasingly focusing on operational, strategic or capital management opportunities to create value.

Malcolm McKenzie, Managing Director and Chair of European Corporate Transformation Services, said: “The extreme volatility that markets have experienced since 2020 has subdued activism across the major European markets. But, as night follows day, such periods of turmoil eventually lead to a surge in activist activity as funds see value creation opportunities in disrupted businesses. With activity in the US already reaching record levels in 2023, Boards should be preparing for the wave of activism to increase in Europe over the next 12 months, with greater demands for strategic and operational improvements to create value.”

Sector trends

The Consumer sector has vied with Industrials as the most attractive sector for activists, with 18 campaigns since January including against Carlsberg and Nestlé.

The rise of campaigns against Communications and Technology corporates in Europe has been a notable dynamic. 13 campaigns in the Communications sector have been launched so far this year, with tar-gets including Vodafone in the UK, Cellnex in Spain and Temenos in Germany.

Similarly, Healthcare companies have been in the spotlight with 12 campaigns launched against targets including Alkermes and Abcam.

André Medeiros, Managing Director and Co-Head of Consumer and Retail, EMEA, said: “Consumer companies continue to be tested with persistently high inflation squeezing margins, impacting volumes and highlighting weaker elements of their portfolios. Activists are demanding strategic and operational transformation to ensure earnings can be maintained in a tougher, lower volume trading environment, along with more disciplined capital allocation. Boards will come under growing pressure to increase returns on capital invested or release value back to shareholders.” 

Outlook for H2

The increasing momentum of European activism is expected to continue through 2023 and into 2024. The AAA has identified 143 corporates that are predicted to be at heightened risk of public shareholder activism, unless urgent action is taken to address the underlying performance challenges.

Activists will likely continue to hone their focus on “Big 5” European markets of the UK, Germany, France, Switzerland and Scandinavia. The UK and Germany will continue to be the most targeted markets given their relative underperformance against global peers, particularly on margins, returns on capital and revenues per employee. We predict that 49 UK companies are at risk of activist campaigns in the next 18 months, with 33 in Germany.

In the UK, activists are expected to focus on the Industrials and Consumer sectors, making up more than half of the predicted targets. Operational underperformance, both at corporate and divisional levels, will be under close scrutiny. Environmentally and socially focused campaigns will also impact these sectors, with a focus on net zero transition and supply chain transparency in particular.

Malcolm McKenzie said: “As uncertainty in the market eases in the second half of the year and into 2024, we predict that a wave of activism will sweep across Europe. Management teams should expect significantly increased levels of shareholder scrutiny in the coming months and, with even more funds taking activist positions, anticipate demands from multiple activists at a time.”

-ENDS-

Notes to Editors

About the AAA

The A&M Activist Alert is the most comprehensive statistical analysis of its kind. Now in its sixth year, the AAA model analyses a range of qualitative and quantitative factors for 1,446 corporates with a market capitalisation of US$200 million or more, listed and headquartered in the U.K., Germany, France, Scandinavia, Switzerland, Benelux, Italy, and Spain. The AAA reviews the performance of those corporates against a further 3,642 of their global peers, and the resulting predictive model has successfully predicted ~50% of corporates publicly targeted by activists since January 2018. 

About Alvarez & Marsal

Companies, investors, and government entities around the world turn to Alvarez & Marsal (A&M) for leadership, action, and results. Privately held since its founding in 1983, A&M is a leading global professional services firm that provides advisory, business performance improvement and turnaround management services. When conventional approaches are not enough to create transformation and drive change, clients seek our deep expertise and ability to deliver practical solutions to their unique problems.

With over 7,000 people across five continents, we deliver tangible results for corporates, boards, creditors, private equity firms, law firms and government agencies facing complex challenges. Our senior leaders, and their teams, leverage A&M’s restructuring heritage to help companies act decisively, catapult growth and accelerate results. We are experienced operators, world-class consultants, former regulators, and industry authorities with a shared commitment to telling clients what’s really needed for turning change into a strategic business asset, managing risk and unlocking value at every stage of growth.

To learn more, visit: AlvarezandMarsal.com. Follow A&M on LinkedIn, Twitter, and Facebook.
 

CONTACT:    

Ellen Johnson
Headland Consultancy, +44 (0) 7901 853 673

Ali Edge-Manning
Alvarez & Marsal, +44 (0) 7887 873130