Corporate agitators slow down in Q2 but ready to pounce in H2 -Barclays data
30/06/2023 12:30
By Svea Herbst-Bayliss
NEW YORK, June 30 (Reuters) - Following the busiest
quarter on record, activist investors slowed down in the second
three months of 2023 but are expected to mount more high-profile
campaigns in the second half amid pent-up demand for
acquisitions and a new way of voting.
Investors including Elliott Investment Management, Engaged
Capital and Legion Partners, launched 53 new campaigns around
the world during the second quarter, down 32% from a record 78
campaigns in the first three months of 2023, according to data
from investment bank Barclays BARC.L .
Still, the overall pace remains in line with activity seen
at the same time last year. Investors, bankers and lawyers
expect a busy second half where activists may become more
involved in trying to jumpstart mergers and acquisitions (M&A).
"Volatile markets and depressed M&A markets are not
deterring activists from launching campaigns in 2023," said Jim
Rossman, global head of shareholder advisory at Barclays. They
are "pushing companies to sell assets to unlock value, and
finding new opportunities in Europe and Asia."
After traditionally hunting for targets in the United
States, activists looked abroad with Europe and Asia making up
nearly 50% of all campaigns and the U.S. contributing only 41%
in the first half, the data show.
Activist investors identify underperforming companies and
then push management to perform better by making changes in the
executive ranks, cutting costs or putting divisions and entire
companies up for sale.
In the first half, 46% of all campaigns included an M&A
component - up from the 42% four-year average - despite sluggish
financing markets and a drop in deals, Barclays data show.
ValueAct pushed for a sale and management change at Japanese
retailer Seven and I Holdings 3382.T , while Carl Icahn is
pressing gene sequencing machine maker Illumina ILMN.O to undo
its Grail acquisition and paved the way for former CEO Francis
deSouza to resign earlier this month.
Elliott has asked utility firm NRG NRG.N to conduct a
strategic review, often shorthand for putting the company or a
division up for sale.
Prominent activists Elliott, Inclusive Capital, ValueAct,
Starboard Value and South Korea's Align Partners, combined
accounted for nearly 30% of all campaigns in the first half.
More than half of all campaigns targeted technology,
industrial or healthcare companies, including several activists
going after Salesforce CRM.N , Inclusive Capital's push at
Bayer BAYGn.DE and Icahn's at Illumina making big headlines.
In the second half, Barclays' Rossman expects to see a
market with pent-up demand for M&A and $1.4 trillion parked in
private equity firms' war chests that needs to be put to work.
Activists may soon play a larger role in "bridging the gap
between buyer and seller expectations" where the two sides are
far off on price, one reason activity has been sluggish, he
said.
Earlier this week, Reuters reported that software company
Enfusion ENFN.N is attracting takeover interest from various
parties including activist hedge fund Irenic Capital Management.
Investors may also be emboldened by the universal proxy card
which was adopted nearly a year ago and lets shareholders pick
and choose among company and dissident director nominees.
"The proof is in the pudding in the 2023 proxy season,"
Rossman said. "Activists won seats at 80% of proxy contests that
went to a final vote, compared to 33% in 2022."
(Reporting by Svea Herbst-Bayliss; Editing by Jamie Freed)
((svea.herbst@thomsonreuters.com; +617 856 4331; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))