US activists set course for Europe

Apr 25, 2014
<p>Forty percent of funds to look outside North America, while activists managed $93 bn in 2013</p>

Many of the world’s activist funds will be looking beyond American companies as a focus for their activities in 2014, according to a study conducted by FTI Consulting and Activist Insight, which shows engaged investors are broadening their tactics and geographical focus.

A number of economic activist investment funds – activists whose primary aims are to achieve increased returns – which have been engaged in more than 500 activist situations since 2000 were surveyed. Though the vast majority of respondents (87 percent) say they see ‘no shortage of targets’ in the US, 40 percent also intimate plans to shift their attentions to European companies.

‘This shift corresponds to the increasing level of activist engagements the market has seen internationally ‒ particularly in the UK, where almost 50 percent of European activism takes place ‒ where corporate governance and legal frameworks are most activist-friendly,’ suggests Edward Bridges, a senior managing director at FTI.

He adds that many firms’ corporate focus has changed to accommodate activism defense planning, as long-only institutions shift to become more activist in their own right.

Data provided for the study by Hedge Fund Research suggests activist hedge funds managed at least $93 bn in 2013 – triple the amount managed five years ago and an increase of 42 percent on 2012’s $65 bn. The report suggests this increase is largely down to big returns for activist funds, which averaged 16.6 percent in 2013, far outpacing the average 9.3 percent mark-up achieved by hedge funds.

Beyond changing geographical horizons, the majority of activists (89 percent) report that they expect M&A transactions to become a new area of focus, either by pressuring companies into transactions or encouraging them to pursue alternative, value-driven options.

The report goes on to suggest that the engaging storyline of some activist initiatives means the media plays an increasingly important role. The impact of Twitter and other social media platforms is outlined, with 69 percent of those surveyed predicting an increase in the use of such channels by activist campaigns in 2014.

‘Activism has gone mainstream and the media has become very supportive of activists that have become increasingly sophisticated in their engagement and in their use of the media,’ suggests Edwards.

Citing veteran activist investor Carl Icahn’s decision to announce his move into Apple’s stock last year, Edwards adds that ‘when considering pre-emptive activist defense planning, companies need to understand what social media strategies are available, both for defense and offense.’

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