By Charlie Conchie
Activist investors are circling the London Stock Exchange this year in a bid to capitalise on the “significant valuation gap” facing UK firms, a new report has claimed.
Alvarez & Marsal, the consultancy firm, found that the number of UK-listed firms susceptible to a swoop from activist investors had increased to 54 this year, making it the most ripe destination in Europe for campaigns by investors.
Activist investors typically quietly build a stake in companies before emerging with a list of demands which they argue will boost its performance and value.
London has seen a slew of high-profile battles between some of its biggest companies and activists in recent years, with Vodafone, GSK and Aviva,at%20the%20FSTE%20100%20company.) all becoming targets due to a perceived underperformance in their share price.
In its report today, Alvarez & Marsal said that the UK continued to be the “preferred hunting ground for activists”, with corporates in the UK facing 59 campaigns in 2023, up from 55 in 2022.
“Activists remain on the hunt for undervalued companies that are ripe for improvement,” said Malcolm McKenzie, a managing director at Alavarez & Marsal. “The UK market in particular has a significant valuation gap compared to its global peers, leaving more room for both M&A and activism in 2024.”
Analysts said the consumer sector remained top of the agenda across Europe, with 30 campaigns against companies including Entain, Carlsberg and The Restaurant Group in the past year.
Activists globally have pocketed bumper returns in the past two years. Firms targeted by activists outperform by 6.3 per cent on average while UK targets have outperformed the market by nine per cent, the report found.
The prospect of an activist offensive is likely to add to the headache of UK boardrooms, which are already facing the prospect of a wave of bids from private buyers looking to take advantage of sluggish valuations.
Analysts have predicted a flurry of take-private deals this year if London does not quickly become a more hospitable place for listed companies, with Peel Hunt last week warning the pace of “de-equitisation” could become “relentless”.
Regulators and the government are under pressure to boost liquidity in the market to help bolster the valuations of London’s listed companies.
However, firms across Europe are also facing the prospect of activist attacks, according to the report today.
The number of activist campaigns increased 12 per cent last year to 193, up from 173 in 2022, and pressure on boards is expected to continue in 2024, with 146 corporates across Europe at risk of an activist attack, according to Alvarez & Marsal.
