Following a surge in activism in the second half of 2020, heightened activity looks set to continue well into 2021, according to a new report published by Skadden in association with Activistmonitor.
The report, Activist Investing in Europe, features a survey of 35 corporate executives from listed companies and 15 activist investors from the UK, France, Germany, Italy and Switzerland, and analyses key trends in Europe’s shareholder activism space.
As the impacts of Covid-19 were first felt across Europe, activity slowed in early 2020 as activists familiarised themselves with the new situation. This was short-lived, however, as H2 saw a renewed wave of activism.
Armand Grumberg, head of Skadden’s European M&A practice, explains: “Activism surged for two reasons: first, some campaigns had been deferred because of the initial stages of Covid-19; and second, new investment opportunities resulted from the pandemic itself.”
While the Covid-19 crisis continues to create long-term uncertainty, activity levels are expected to remain elevated, placing high pressure on issuers in the near future. The vast majority of corporate respondents surveyed (80%) anticipate an increase in shareholder activism post-pandemic, with 54% expecting a significant increase. Most activists surveyed (60%) expect overall campaign volumes to return to their pre-pandemic levels before the end of 2021.
Scott Hopkins, who leads Skadden’s UK public M&A practice, anticipates a resurgence in US activists in the year ahead. “The US funds have been watching and waiting. I think the reasonable expectation is that they will be coming back to Europe.” This notion is supported by survey respondents – all activists surveyed agree that European companies should be very concerned about the possibility of being targeted by North American activists, while 97% of corporate respondents say the same.
As sustainability concerns increasingly take precedence in deals, activists already seem more ESG-minded than boards realise. All activists surveyed claim they will prioritise ESG issues in their campaign demands, with 67% agreeing strongly with this statement. In contrast, only 28% of corporates believed this to be true. This focus on ESG is not just a Covid-19 phenomenon, but rather part of an ongoing trend that looks set to continue.
The survey findings show that activists have a clear view of where they will engage and the demands they will make – corporates must be equally prepared. No European issuer should consider itself immune from an activist attack.