A string of high-profile campaigns involving blue-chip heavyweights such as supermarket giant Morrisons and oil explorer Petroceltic has led to investors also turning up the heat on mid-cap companies.
City of London law firm Linklaters said that, globally, activist shareholders launched 272 actions in the first six months of this year, putting 2014 on track for a record year after a total of 520 cases in 2013.
Its report, published today, notes that seeking boardroom representation continues to be the most popular tactic among activists, accounting for two-fifths of all campaigns in the first half of the year.
The research suggests that investors are becoming more sophisticated and effective in pushing their campaigns forward. Globally, 60 per cent achieved their objectives in the latest six-month period, against 56 per cent throughout 2013.
Charles Jacobs, a partner at Linklaters specialising in mergers and acquisitions (M&A), said: “A key driver behind the rising level of activism is the improving economic environment as we see the return to profitability of many industries globally.
“This is not only encouraging more investment into the growing universe of activist funds but is also applying pressure on companies to utilise the significant cash on their balance sheets and to engage in M&A activity.”
The report cites the intervention earlier this year of Elliot Management at Morrisons, with the US hedge fund pushing the grocery chain to spin-off its property assets in order to unlock value for shareholders. It also refers to investment management company Worldview Capital’s recent criticism of Petroceltic’s plan to raise equity. Other rebellions have focused on boardroom remuneration.
Linklaters said the “epicentre” of publicly disclosed activism was the United States – the focus for 81 per cent of campaigns from January to June of this year. It is thought that a “significant” proportion of activist campaigns in Europe pass without being made public, the firm added.
The study found that just 13 per cent of interventions were unsuccessful in the first half. Activists reached a compromise or settlement in 15 per cent of their campaigns, and withdrew their demands or board nominations in a combined 6 per cent of cases.
Ralph Wollburg, a Düsseldorf-based partner and head of Linklaters’ global corporate advisory group, said: “Activist investors are becoming more sophisticated and effective in pushing their campaigns forward.
“We are seeing an increased focus this year on companies in the $250 million to $2 billion market cap range [£147m to £1.8bn] and, across the board, the activists are enjoying increasing success. For the time being, unsuccessful campaigns are the exception.”
According to the report, companies with market values of between $250m and $2bn accounted for more than 35 per cent of all campaigns, up from 30 per cent a year earlier.
The law firm commissioned Activist Insight to provide data for the study, which came from a variety of sources including stock market regulatory filings, emails and interviews.