July 28, 2017
To measure the potential risk, FTI Consulting created an index to track activism threat level by country and map key activists residing in each location. Our findings show that the countries with the highest risk of an upsurge in activism are Australia, Canada and the United Kingdom. This risk can largely be attributed to changing economic factors, including a strong U.S. dollar, undervalued asset prices and increased global scrutiny of corporate governance standards in each country.
Notable activist investors, such as ValueAct, Elliott Management and Third Point, are becoming increasingly global, with activist investments now spanning multiple countries around the world. Elliott Management has continued to be very active internationally as five of its twelve campaigns so far this year were outside of the U.S.
Japan and China are also experiencing a rise in activism. While Chinese activism tends to be short focused, Japan’s increase is a result of recent changes in its corporate governance rules. In 2015, the Japanese government introduced a new corporate governance code aimed at making Japanese companies more attractive to investors by requiring firms to appoint at least two outside directors.
The threat of U.S.-style shareholder activism is no longer confined to the United States. In fact, this threat is a growing trend. Companies of different sizes, sectors and geographies have been targeted by activists, both publicly and behind closed doors, presenting boardrooms around the globe with fresh impetus to better understand and prepare for shareholder activism.
North America hosts most shareholder activists and has provided the market for these funds to grow and mature. This has led to a diversity of activism campaign types and styles. No single campaign type dominates, which demonstrates the level of sophistication and customization these funds have applied to campaigns. The drop in campaigns to gain board representation might be a result of the increase of behind the scenes settlements with management teams and therefore management teams ending campaigns before they begin. Activists, particularly in the U.S., have alternatively prioritized campaigns to remove CEOs, even at blue chip companies.
NB: our analysis excludes by-law amendments, as they are often automatic fillings from passive investors.
As activism matures in the U.S., many of the most prominent activism funds have looked outside of the region for more target opportunities, which will likely continue as alternative markets open up and become more attractive to foreign investment.
In EMEA, activist investors are increasingly seeking the removal of current management or board members. Campaigns solely to gain board representation are less common so far this year as activists have become more sophisticated in their approach to activism in EMEA as demonstrated by Elliott Management’s campaign at Akzo Nobel regarding a potential merger with PPG Industries, Inc.
Activism threat levels are expected to keep rising across EMEA due to shareholder-friendly regulations, and availability of targets. Structural defenses still slow activists in some jurisdictions; however, political pressure to create attractive investment markets might cause this to change.
In Asia-Pacific, shareholder activism in Australia dwarfs that of other jurisdictions and the region has become the second hottest market for activism. Removal of a CEO or Board member remains the go-to strategy in Australia and has gained steam this year. Shareholders in countries such as Hong Kong are well educated about their rights, which has inspired even more campaigns to identify fraud.
Elliott Management’s campaign at BHP indicates the willingness of foreign investors to set up shop in Australia and go after even the largest companies. Openness to foreign investment and unrestrictive corporate governance framework make it likely that this trend will continue. A similar trend in Asia has ushered in even more short-selling activity and activism campaigns against business fraud.
The Strategic Communications segment of FTI Consulting conducted secondary research to map the regulatory environment of 14 critical activist investor jurisdictions. The Global Shareholder Activism Map contains activist campaign data as of June 30th, 2017, sourced from Activist Insight. The map examines nearly 5,400 activist campaigns, and excludes campaigns aimed at amending bylaws, as they are often automatic fillings from passive investors.
FTI Consulting developed an index to indicate country-specific activism threat level, which encompasses current campaign trends, corporate governance changes, and the overall likelihood of future activism investment. FTI Consulting’s Global Shareholder Activism Map will be updated regularly to reflect the most recent developments by country and highlight new trends in global activism investing.