Investors in FTSE 100 and FTSE 250 companies should expect more shake-ups from activist investors this year, if recent activity is anything to go by.
Last weekend, it was revealed that Vodafone PLC is the latest FTSE 100 company to have been targeted by these interventionist funds.
READ: Who is Vodafone's new activist investor and what might they want?
The stake taken in the telecoms giant by Swedish hedge fund Cevian Capital makes it nine companies in London’s blue chip index that have activists on their shareholder register, along with several peers on the FTSE 250.
While many directors and some shareholders too view these funds as a pest, most investors both large and small are likely to welcome their presence at the minimum jolting management into action and at the other end of the scale, forcing major boardroom shake-ups and corporate actions.
Several observers have also hailed activists for challenging bosses and being a catalyst for healthy debate between management and shareholders.
What’s more, companies like Shell and BHP have also been targeted by climate and environmental activists, such as Market Forces in Australia and Milieudefensie in the Netherlands, though they don’t buy a large stake in the companies they are putting pressure on at AGMs or in the courts.
There have also been public criticisms from major institutional investors of companies such as Spire Healthcare, G4S (LSE:GFS), Aggreko (LSE:AGK) and William Hill, while companies on AIM have also been targeted by activists and shareholder dissent.
Various reports have cited a rise in activist activity in the UK, including from more generalist funds, with a 29% surge in shareholder votes against director re-appointments at FTSE 350 companies last year, according to a report last month from Thomson Reuters (NYSE:TRI).
Compare this with the US, the home of activist investing, where the number of campaigns and amount of investment was flat year on year in 2021, according to Lazards annual review, with valuations already pretty stretched.
As countless observers have noted, UK shares are “very very cheap” or “exceptionally cheap” according to who you ask, which as well as sparking increased activist activity, has also made London the scene for plenty of M&A activity.
Activists on shareholder register of at least 12 companies in the FTSE 350
- Aviva (Cevian Capital)
- Countryside (Browning West)
- SSE (Elliott Advisers)
- GSK (Elliott Advisers, Bluebird)
- Pearson (Cevian Capital)
- Playtech (Gopher Investments)
- Rolls-Royce (Causeway Capital)
- Shell (Third Point)
- Taylor Wimpey (Elliott Advisers)
- Unilever (Trian Partners)
- Vodafone (Cevian Capital)
- WH Smith (Causeway Capital)
Several others have been targeted in recent years, including Barclays, BHP, Whitbread and FirstGroup (LSE:FGP), while Just Eat Takeaway still is being pursued by activists but has dropped out of the Footsie as it moved its HQ to Holland.
In December, Adviser Alvarez & Marsal trumpeted the “golden age” of activism, with 21 UK companies in the crosshairs, more than any other country in Europe.
The report also saw 148 European companies at risk of being targeted by activists, of which more than a third were listed in London.
Indeed, London companies’ relatively lowly valuations are a substantial part of why London is being targeted.
A study of the 100 largest activist campaigns around the world, published this year, found Britain was the third most active country.
However, as noted in the FT today, activists have had to adapt their tactics in London and be more aggressive, while also requiring long-term investors to support the campaign and its aims.
What’s more, the main aims of most activists are solely to drive short, or at most medium-term share price gains, not necessarily for the benefit of society or the planet.
Maybe it’s time the UK had its own ESG-focused activist investors.