Levels of shareholder activism have been consistently elevated in Europe since Q4 2020, following a Covid-related pause in 2020.
In the first half of 2022, there were approximately two thirds more activist campaigns in Europe than in the first half of 2021 and European activism reached record numbers for a first half-year period.
Approximately one third of European activist targets in the first half of 2022 were UK companies. In fact, by some measures, the UK stock markets have had the highest levels of shareholder activism in the world in recent years. This has been driven, in part, by lower relative valuations on London markets compared to other major stock markets and shareholder friendly governance rights. UK companies which have been the subject of an activism campaign in the first half of 2022 include Shell (Third Point), Unilever (Trian Partners), HSBC (Ping An), Glencore (Bluebell) and SSE (Elliot). A number of these mentioned campaigns sought a break-up or separation of the target groups.
Notably, approximately a fifth of all activist targets in Europe were French and the levels of activism in France have increased significantly over the past few years.
Levels of shareholder activism have been consistently elevated in Europe since Q4 2020, following a Covid-related pause in 2020.
In the first half of 2022, there were approximately two thirds more activist campaigns in Europe than in the first half of 2021 and European activism reached record numbers for a first half-year period.
Approximately one third of European activist targets in the first half of 2022 were UK companies. In fact, by some measures, the UK stock markets have had the highest levels of shareholder activism in the world in recent years. This has been driven, in part, by lower relative valuations on London markets compared to other major stock markets and shareholder friendly governance rights. UK companies which have been the subject of an activism campaign in the first half of 2022 include Shell (Third Point), Unilever (Trian Partners), HSBC (Ping An), Glencore (Bluebell) and SSE (Elliot). A number of these mentioned campaigns sought a break-up or separation of the target groups.
Notably, approximately a fifth of all activist targets in Europe were French and the levels of activism in France have increased significantly over the past few years.
Outlook
We expect to see continued high levels of shareholder activism in London.
This is for various reasons including that:
A number of European and London listed companies have seen their share prices fall significantly in 2022, which may precipitate interest from activists;
The London market is cheaper than other major equity markets. By some estimates, UK equities trade at an approximately 40% discount to non-UK equities (on a historic PE basis), and, the FTSE 100 trades at a forward PE of about 10; and
The pound sterling has fallen significantly against the U.S. dollar and was one of the worst performing major currencies in the first half of this year, making UK companies more attractive to non-UK activists. In the 6-month period ended 30 June 2022, sterling fell by more than 10% against the U.S. dollar.
We expect ESG-related themes will continue to be important in London and European activist campaigns. This is in particular given the recently introduced regulations in the London market which will require certain companies to report publicly on climate, gender and other related ESG issues. We expect activists to scrutinize this information carefully and, where there are shortcomings, to use this information to develop ESG-related themes to support the economic arguments which they are making.
We also expect that activists will continue to seek break-ups and/or separation of groups with unrelated businesses. As we mentioned above, there have been a number of recent break-up and/or separation campaigns in London, including in relation to Shell, HSBC, Glencore and SSE, and a number of these campaigns have sought to combine economic and ESG arguments to maximize their impact.
Sam Bagot
Partner
London
T: +44 20 7614 2232
sbagot@cgsh.com
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Tihir Sarkar
Partner
London
T: +44 20 7614 2205
tsarkar@cgsh.com
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