London – September 18, 2017 – Global professional services firm Alvarez & Marsal (“A&M”) today announces the findings of its latest quarterly analysis of shareholder activism in Europe, the “A&M Activist Alert”, or “AAA”. The AAA reveals that the number of U.K. companies predicted to be under threat from public activist targeting has risen to 54 over the past three months. This increase comes despite eight U.K. companies having been targeted publicly by activists during the past quarter, of which five were correctly predicted by A&M in their analysis from June 2017.
A&M Activist Alert
The AAA is the most comprehensive statistical analysis of its kind. The analysis was initially undertaken in June 2017 with a focus on 1,170 corporates with a market capitalization of US$250m or more in the U.K., Germany, France, Switzerland and Scandinavia. In the latest September update this analysis has been extended to also include Benelux and Italy, and now covers 1,564 corporates. The resulting predictive model successfully predicted 58 percent of corporates publicly targeted by activists since January 2015. Individual companies can check their position on the Alert List by contacting A&M.
Key findings include:
- On average, U.K corporates are 32 percent more likely to be targeted than those from the other six nations/regions analysed in the AAA. Benelux also stands out as being 25 percent more likely to be targeted.
- German companies stand out from the alternate perspective in that they make up 16.1 percent of the sample but 10.8 percent of the predicted targets.
- Boards are being granted less time to address underperformance. The average time between first evidence of underperformance and public activism has reduced from just over 2 years in 2016 to 1.9 years in 2017.
- Consumer and Industrials companies make up the largest number of entries on the lists of corporates at risk. On average, the Materials sector is 27 percent more likely to attract public activism whilst Healthcare is 17 percent more likely. Energy is 101 percent more likely, reflecting the effect of market disruption and challenges.
- European activists are on the march, with European funds currently accounting for approximately 26 percent of global activist or event-driven funds, up from 22 percent in 2016.
- Of all public activist campaigns in Europe from 1 January 2015 to date, 69 percent included a demand for changes on the Board.
- There are early indications that increasing the number of women on a Board may be associated with a reduced risk of shareholder activism.
- Market disruption drives activist interest as it tends to increase the performance gaps between corporates in the sector and enables activists to identify corporates that were high performers but have fallen back.
Malcolm McKenzie, Managing Director and Head of European Corporate Transformation Services, said: “Activists are becoming increasingly impatient with Boards and perceived sub-optimal performance. Boards need to ensure meaningful change is delivered, with positive results being shown clearly, without delay. Any transformation programme that takes longer than 18 months to produce tangible results will be too little, too late.
“Our research has again shown that activists don’t go for the weak and underperforming companies. They are focused on second quartile performers that could make the step up to first quartile. We have also found that, while the U.K. remains a key target, activists’ crosshairs are increasingly focusing elsewhere in Europe and funds are showing a greater ability – and willingness – to adapt their approach to the local environments and sensibilities.”
Notes to Editors
The AAA model
The A&M Activist Alert model is fully reassessed and refreshed every three months including a full review of all new known activist actions. This allows us to see how the key variables, timescales, country and industry factors have moved in terms of relative importance. A&M also reviews which companies have moved on or off the Red or Amber Lists.
This updated September 2017 analysis is accompanied by a focused report that explains the methodology plus the key findings and clear messages of importance to corporates and their Boards seeking to avoid the high potential financial and reputational costs associated with a public activist programme. Individual companies can check their position on the Alert List by contacting A&M.
Red and Amber Lists
The AAA model calculates a score for all analyzed corporates that predicts the likelihood of public activist action. Companies with high AAA Scores, and therefore with a higher predicted likelihood of public targeting, are classified as either Red or Amber. These classifications are based on the level of AAA Score and how sustained it has been over the past two years.
Corporates with high AAA Scores on both the two year and one year bases are considered to be at high short term risk (next six to 12 months) of public activist action and may already be subject to non-public approaches. Such high risk corporates feature on the Red List. Companies with a high AAA Score on either the two year or one year basis are likely to be being monitored by activists. Such companies are considered to be at medium risk which will only increase if corrective action is not taken within 12 to 18 months. Such medium risk corporates feature on our “Amber List”.
About Alvarez & Marsal
Companies, investors and government entities around the world turn to Alvarez & Marsal (A&M) when conventional approaches are not enough to activate change and achieve results.
Privately held since 1983, A&M is a leading global professional services firm that delivers business performance improvement, turnaround management and advisory services to organizations seeking to transform operations, catapult growth and accelerate results through decisive action. Our senior professionals are experienced operators, world-class consultants and industry veterans who leverage the firm's restructuring heritage to help leaders turn change into a strategic business asset, manage risk and unlock value at every stage. A&M now has more than 300 professionals serving major private equity and multinational corporates in Europe, up from some 30 people five years ago.
When action matters, find us at alvarezandmarsal.com.
Del Jones, Henry Wallers
Headland Consultancy PR, +44 (0)203 805 4828
Margaret Cameron-Waller, Director of Marketing U.K. & Europe
Alvarez & Marsal, +44 (0)207 715 5202