Shareholder Activism | Management
Shareholder activism—when investors in a company use their equity as a lever to pressure management—is booming and will grow dramatically on both sides of the Atlantic through mid-2016, according to a survey of corporate and activist investors by Schulte Roth & Zabel, a law firm in New York and London that advises on shareholder activism campaigns. The results of the survey, which the firm conducted with M&A data provider Mergermarket between April and June, point to a sharp increase in shareholder activism during the coming 12 to 24 months. Leading the charge are American hedge funds that have been emboldened by recent victories in the US and are now instigating action by dissatisfied investors on the other side of the Atlantic in the wake of Europe’s debt crisis, according to the survey.
In the US, the vast majority of respondents—48% “significantly” and 50% “somewhat”—said they expected the number of shareholder actions to increase to mid-2016. They expect hedge funds and union funds to lead the charge, targeting companies mainly for poor financial performance, planned acquisitions and changes in management. The overwhelming majority of investors (86%) expect banks to fall into the crosshairs by mid-2015, while most (62%) make the same prediction about chemicals and industrial companies. Banks are being targeted for “offering low dividends,” leading investors “to enquire about the reasons behind underperformance,” an unnamed activist investor was quoted as saying.
In Europe the survey found that most investors (77% of corporate and 67% of activist investors) expect shareholder activism to “pick up pace” moderately or significantly by mid-2015, targeting companies saddled by bad debt. The majority (76%) also expect activism in Europe “to have American roots” and to be led by US-based hedge funds. American activists have more experience; European activists have been stymied by differences between laws governing shareholder rights across European borders. But by mid-2016, the survey concluded, European activists are likely to have their own hands at the helm.