Few would disagree that 2016 has been a year of pivotal events. Amongst them, Brexit and the outcome of the U.S. elections surely come top of the list for most. Both occurrences have set in motion a new political and economic dynamics that have impacted the post financial-crisis market framework, changing corporations and investors’ attitudes and outlooks over the short amount of time since they came to be.
As it would be expected, shareholder activism trends have not been impervious to this new dynamic.
In the months since the UK’s vote to leave the European Union, interest from overseas activists in British companies has grown. According to a report by Activist Insight, between June and September this year there was a 27 percent increase in the number of foreign investors eyeing British Plc’s as potential targets – not just in the immediate aftermath of the decision to leave, but also bearing in mind a mid to long-term, post-Brexit UK reality. Opportunities loom and their appeal is unequivocal.
In a recent column for The Times, Richard Page from law firm Mayer Brown, stated that besides an increased foreign interest from activist investors in UK companies, what we are also witnessing is a shift in pace and focus in regards to approaches, which herald a new take on activism initiatives.
Gone seem to be the days when disputing executive pay practices and board’s investment strategies was the sole focus of activist shareholders’ initiatives. Instead, we are seeing a broadening of scope that more often than not also includes a push for a social agenda and an emphasis on changing corporate governance practices.
Such encompassing approaches have their origins in the U.S. where practices have traditionally been much more adversarial in terms of shareholders’ involvement – American activists tend to be more public in voicing how they believe companies should be run and corporate strategies laid down.
By contrast in Europe and the UK in particular, investors’ say on how companies are run has always been a much more engagement-led process, actioned only after years of following a company’s board decisions and only after activist shareholders have had a chance to get to know the business’ board members during AGMs and results days.
But the differences between both styles might be fading. Despite Joseph Oughourlian, Founder of Amber Capital, saying at a Bloomberg event last month that the likelihood of a U.S.-style of shareholder activism approach working in Europe is remote, the fact remains that there are indicators pointing that the differences between U.S. and UK are breaking down.
This is even more so the case, now that the UK is to leave the European Union. As Richard Page puts it “with UK companies now more exposed to non-UK activist shareholder focus, particularly after the Brexit vote in June created market volatility and prompted share price falls for the largely domestic FTSE-250 mid-cap index and a currency slide for sterling” we are bound to see some interesting changes over the next few months, as the wider macro landscape dictates a framework readjustment in both sides of the Atlantic that might bring a low a whole new concept of what shareholder activism is likely to be going forward.