³ÉÈËÓ°Òô

This Market Tracker trend report looks at recent trends in shareholder activism in the UK, including a review of developments in H1 2020 and the outlook and predictions for H2 2020 and beyond. Produced in association with White & Case and Activist Insight, with contributions from UBS Investment Bank, Georgeson and Greenbrook, it also looks at how companies can prepare for an activist approach and provides tips on how activists can run a successful campaign in the UK.

Click here to download a PDF copy of the report

Topics covered include:

• activity levels, including the number of companies targeted and the capital deployed on campaigns
• target company profile, including industry sector and size
• activist profile, including the number of first-time activists
• the types of demands that are activists making
• how successful activists are in achieving their demands
• how companies can prepare for an activist approach
• tips for a successful activist campaign

Report highlights

• Subdued activity in H1 2020

After a record number of activist campaigns in 2018 and the first half of 2019, activity levels in the UK were more subdued in H1 2020 which many commentators are attributing to the impact of the coronavirus (COVID-19) pandemic. 17 UK companies were publicly subjected to demands by activists in H1 2020 (H1 2019: 38 companies; H2 2019: 25 companies).

• Increase in aggregate capital deployed in H1 2020 campaigns

Although the number of companies publicly subjected to activist demands decreased in H1 2020 when compared to H1 2019 and H2 2019, the aggregate amount of capital deployed in campaigns was significantly higher, with the value of newly disclosed activist investments by primary and partial focus activists at UK-headquartered companies being US$2.9bn. This is nearly double the levels seen in 2019 (H1 2019: US$1.3bn; H2 2019: US$1.4bn) and was largely attributable to the activist campaign against Prudential, which accounted for over US$2bn of activists’ positions in H1 2020.

• Basic Materials, Financial Services and Industrials the most active sectors for activist campaigns

Shareholder activism was spread across a range of sectors in H1 2020. Basic Materials, Financial Services and Industrials were the most active sectors in the UK, with three companies the subject of activist campaigns in each sector. The Financial Services sector saw the highest amount of capital deployed by activists in the UK, with the value of newly disclosed activist investments by primary and partial focus activists at UK-headquartered companies in H1 2020 being US$2.4bn.

• Activists most likely to make board-related demands

Activists pursued a range of strategies in H1 2020, with the most common demand in the UK being board-related, which accounted for 18 (56%) of the 32 public demands made by activists during the period. The next most popular demand types were M&A (22%) and balance sheet-related (9%).

• Smaller percentage of successful activist campaigns in H1 2020

Activists enjoyed a lower success rate on UK campaigns in H1 2020 compared with 2019, with only nine (24%) of the 37 public demands that were resolved in that period being at least partially successful (H1 2019: 44%; H2 2019: 54%). Of the remaining 28 demands, 18 (49%) were unsuccessful and 10 were withdrawn or superseded by external events (eg, the bankruptcy or takeover of the target company) during the period.

• All UK board seats won by activists via settlement

Activists won a total of four UK board seats in H1 2020 (H1 2019: 16 seats; H2 2019: 15 seats). All of the UK board seats won by activists in H1 2020 were settled without the need for a shareholder vote, an increase from 2019 when 68% of UK board seats were secured through settlements and 32% went to a shareholder vote.

Market commentary

The report contains expert commentary from:

• Josh Black, Activist Insight
• Cas Sydorowitz, Georgeson
• Andrew Honnor and Rob White, Greenbrook
• Darren Novak, UBS Investment Bank
• Amanda Cowell, Tom Matthews, Guy Potel, Dominic Ross and Patrick Sarch, White & Case