Activism is back in the UK as campaigns double

Oct 12, 2021
Last 12 months saw 46 campaigns at 42 companies, finds Squarewell Partners’ research

The number of activist shareholder campaigns targeting UK companies has almost doubled in the past 12 months, according to research from Squarewell Partners, which shows that 42 companies were targeted – up from 24 companies in the previous year.

‘The rise was most pronounced in FTSE 250 and AIM companies,’ says Squarewell in its new report. ‘In the FTSE 250, there were campaigns by Gopher at Playtech and Coast Capital at FirstGroup but also a series of public criticisms from top investors of companies subject to buyout offers,’ such as Spire Healthcare, G4S, Aggreko and William Hill. On the AIM market, Squarewell notes that demand for board seats remained strong but it was potential buyouts that peaked investor dissent.  

The consultancy says the past year has provided insight into the trends that are likely to stick around: ‘activist situations triggered by momentum from private equity interest in UK plc, and the emergence of environmental and social issues.’

Commenting on the findings, Andrew Brady, report author and senior analyst at Squarewell Partners, tells IR Magazine that ‘activism often addresses deficits between management positioning and investor expectations, whether it be on environmental issues or strategic value creation.

‘Companies should prioritize an understanding of their shareholder base as a means of preparation for campaigns seeking to leverage these differences,’ he continues. ‘From this understanding, it is then important for a company to communicate this to the market through its equity story, integrating the long-term value proposition of the business alongside the core ESG principles that the business is built on.’

The report looks at the different tactics activists use to push their demands forward and Squarewell notes that board seat demands were ‘invariably fought over shareholder proposals.’

Seven activists were able to achieve their objectives through public pressure, it notes, while three were unable to do so, and 24 chose to escalate to either a vote no or a shareholder proposal. ‘On average, Squarewell says shareholder proposal success ‘requires a much larger holding than for a vote no or public pressure’. On average for shareholder proposal success, a 23.6 percent shareholding was needed, says Squarewell. This drops to 16.8 for public pressure success and 7.9 percent for a no vote.

Overall, ‘institutional investors gave limited support to shareholder proposals,’ according to the report author. The highest degree of support by asset managers was on climate-related proposals at BP and Royal Dutch Shell by Follow-This, which saw 21 percent and 31 percent support, respectively.

Top institutional investors were also supportive of a number of campaigns that opposed management proposals. Catalist’s campaign at Foxtons for example received support from ISS that was echoed by BlackRock and Aviva Investors, alongside Vanguard who voted against pay, says Squarewell. It adds that institutional investors also give their support for public pressure campaigns. ‘In the period analyzed we saw opposition vocalized by investors against what were seen to be undervalued buyout offers.’

Alongside ISS’ support for management opposition at Foxtons, the proxy advisor also recommended against two other management proposals where the company was targeted by an activist this year. Glass Lewis was ‘more activist friendly,’ than ISS Squarewell notes, deciding against five management proposals opposed by activists.

In what might appear to be a contradictory note, the consultancy also describes Glass Lewis as ‘management friendly,’ as it supported no shareholder proposals in the past 12 months. ISS supported three proposals at two companies.

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