Disruption from Brexit could spark an increase in activist investors targeting public companies in the UK, a new report has warned.
The UK, which is already Europe’s largest market for activists, is at risk of drawing more attention from investors looking to pile the pressure on management over the coming year.
Professional services firm Alvarez and Marsal has said that disruption caused by Britain’s expected departure of the EU will “lead to greater opportunities for activists in the UK, and a weakening of sterling could prompt greater interest in buyouts and public-to-private deals”.
A&M managing director Malcom McKenzie told City A.M: “Activists like disruption because in disruption some management teams don’t manage so well, and a good company becomes poorer.
“That gives activists an opportunity, when the share price doesn’t represent the value of the company. Brexit is a disruption, and some companies won’t manage their way through that well.”
“When markets suffer any kind of disruption, people react very differently…it is easier for activists to see who is not responding well,” Paul Kinrade, senior adviser at A&M added.
“Activists are not looking for the weakest companies, what they want is a company whose share price has fallen away.
“If they can see a better route to bringing that change they buy in, they become active and push for that change.”
A&M’s report showed that 54 UK companies are now at risk from activists, rising from 52 in April.
However, the UK’s dominance is eroding as activism across Continental Europe gathers momentum.
“As activism becomes more entrenched in European markets, shareholders are increasingly employing activist tactics against boards they disagree with, with traditional institutional investors also taking more vocal stances,” the report said.
The European market for activism is set to grow next year, with 158 countries on the continent braced for activists, rising from 150 in April.
Read more: CBI: UK economy to slow despite Brexit deal
Industrials remain a significant sector for activists, but interest in consumer companies continues to decline.
A number of activist campaigns have mounted in the last year, with Ferguson, Imperial Brands and Domino’s Pizza all being targeted in the UK.
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