An activist investor revealing their stake in a firm is enough to set even the most battle-hardened bosses shifting in their seats. And UK boardrooms have therefore had plenty to get nervous about in recent months.
Vodafone was this weekend the latest British company to fall into the sights of an external agitator in the form of Cevian Capital. Unilever and GlaxoSmithKline have come under pressure from notorious US investors Trian and Elliott respectively, Dan Loeb’s Third Point revealed a $750m stake in Shell in October, and hedge fund Bluebell Capital Partners has been pushing for change at commodities giant Glencore, to name a few.
Analysts say that the spate of interest in UK companies from foreign investors is by no means a coincidence.
“We’re speaking with activists active in the UK and they’re saying the same thing: The market as a whole might be fairly valued but there are pockets of undervaluation – not just relative to the US market but also the European market,” says Iuri Struta, Vice President, Activism and M&A at Insightia.
“That obviously presents a huge opportunity for the activists.”
The appeal, says Struta, is also a cultural one. With no language barriers and a more robust governance structure, he says, US activist investors see UK boardrooms as a much easier place to push through the changes they want compared to Europe.
The flurry of activist interest in the past months has also been a result of the easing of Brexit and pandemic headwinds that have battered the UK.
“During the pandemic, UK companies that looked flabby and like they were heading in the wrong direction have had the benefit of the doubt,” she says.
“But the lay of the land is a lot clearer now and there is a lack of patience for the speed of management for turning round some of these underperforming ‘big ships’”, Streeter says.
And the pressure is certainly building on the captains of those ships.
News of Trian Partners’ stake in beleaguered Unilever sent investor hopes soaring, after Trian had famously delivered a string of successful interventions at consumer firms like P&G and, in the UK, Cadbury.
The investor response seems to bear out the belief that the presence of an activist like Trian will deliver returns to shareholders. And at a time of rising global interest rates, the appeal of UK firms has been heightened says Struta.
“FTSE 100 stocks are considered value stocks – they trade at very low multiples, they are well established, profit making companies, but they’re not as profitable as they should be, in the view of activists.”
As the economic conditions continue, UK boardrooms can therefore expect to see the activist investors continuing to circle.