Monday 10 February 2020 3:21 pm

European companies could face upsurge in activist raids

European companies could face an upsurge in activity from activist investors, analysis released today showed.

One in 20 European companies with a market capitalisation of over $250m (£193m) have been targeted by activist investors in the past five years.

This is half the rate (one in 10) for similar size companies in the US.

The number of companies targeted by activist investors over the last five years has doubled in Europe, but the gap in activist activity levels in the US and Europe suggests there could still be some way to go.

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Activist investors buy stakes in companies they think are underperforming and then try to force a change of strategy to drive up the share price.

Deloitte M&A partner Jason Caulfield said that while mega corporations (over $50bn) in Europe were targeted by activists at similar levels to those in the US, there was a big drop in the percentage of companies valued between $250m and $50bn in Europe affected by activists.

“They have been systematically going through the bigger companies but so far haven’t really got stuck into the FTSE 250 and below and equivalent markets [in Europe],” he said.

“Those companies are probably less well equipped to deal with an activist campaign.

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“The bigger companies will have an activist defence in the drawer ready to go, where some of these smaller companies aren’t going to know what has hit them,” he added.

The research shows 4.2 per cent of London Stock Exchange businesses have been the target of an activist campaign, compared to 6.7 percent of companies on Euronext Amsterdam, 5.3 per cent on Deutsche Boerse and 6.2 per cent on Euronext Paris.

Recent activist campaigns in the UK include Edward Bramson using his Sherborne Capital vehicle to try and force Barclays to cut shake up its investment bank.

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Major US funds such as Elliott Management, Blue Harbour and Third Point have increasingly set their sites on Europe in recent years.

“The US activists that have set up shop over here tend to lean into this a lot more. They write cheques that are twice as high and probably go for more aggressive strategies,” Caulfield said.