Shareholder activism more than doubles since 2010

Nov 12, 2013
<p>Board representation campaigns outstrip those pushing for buybacks</p>

Activist investors have waged more than 415 campaigns against companies across the world over the last 12 months – up from 172 in 2010.

Activists have also widened their scope from the ‘traditional hunting ground’ of the financial services sector, according to research conducted by Activist Insight and commissioned by law firm Linklaters, with the services industry accounting for 24 percent of activist actions in the first nine months of this year, and technology companies making up 22 percent of the total.

Getting a representative onto the board of directors at a targeted firm is the most popular goal for activists, with almost a quarter (24 percent) of campaigns seeking to do so. In fact, this year twice as many actions were initiated to remove a chief executive or other board member as in 2010. As a result, such campaigns outnumbered those pushing for share buybacks – the next most popular action – by more than three to one in the first nine months of 2013.

Globally, there was an 88 percent increase in shareholder activism between January 1, 2010 and September 30, 2013, rising to 129 percent for mid and large-cap companies with a market capitalization of more than $2 bn.

The majority of this increase has come from the US and Europe, with researchers noting that while the US still accounts for ‘the lion’s share of these actions’ after an 80 percent uplift since 2010, activism in also growing across Europe, where the same period saw a 62 percent uplift in the region.

‘Shareholder activism is on the rise and is affecting European boardrooms,’ says Charles Jacobs, a London partner at Linklaters, in a press statement. ‘Big companies are typically well equipped to deal with takeover approaches, but many need to be better prepared than ever to respond when activist shareholders appear on their share register.’

Outside of North America and Europe, the market remains nascent, report researchers, although they note that activist campaigns in the ‘rest of the world’ have tripled since 2010.

While ‘the financial benefits of activist investment strategies are difficult to measure objectively’, Linklaters says the outcome can vary significantly depending on how the board reacts. ‘Companies should consider each activist’s argument on its merits,’ advises Jeremy Parr, global head of corporate at Linklaters. ‘Boards may need to decide swiftly whether and how to respond.’

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