Activist Investor `Wolves' to Focus on Industrials, Report Says

(Bloomberg) -- Large industrial companies are seen becoming the most preyed upon in Europe by activist investors looking to force through strategic change, according to a report by a global consulting firm.

The attention of activists is moving away from the consumer sector as many such companies, particularly retailers, are too weak, while others have already been targeted, according to Alvarez & Marsal Inc. Energy companies are also dropping off the radar as recovering commodity prices fuel improving profits and share prices.

Many industrial companies “operate under a conglomerate structure, often reporting uneven divisional performance,” said Malcolm McKenzie, a managing director at A&M in London. “At a time when private equity funds have record levels of dry powder to deploy, activists are well aware of the opportunities to spin off underperforming business lines.”

Activist Investor `Wolves' to Focus on Industrials, Report Says

Insights From Report

  • Out of 148 companies that are most likely to be targeted in Europe, 56 are U.K. businesses, making it the most attractive market for activists.
  • Greater age diversity on a board can help deter activists, while increasing the number of women on a board may also cut the risk.
  • Analysis focused on 1,771 companies with a market value of at least $200 million listed in the U.K, Germany, France, Scandinavia, Switzerland, Benelux, Italy and Spain

Boards need to act fast in addressing underperformance “before the wolves come calling,” McKenzie said.

More than a hundred companies based in Europe have been publicly subjected to activist demands so far this year, according to a separate study by researcher Activist Insight and law firm Skadden, Arps, Slate, Meagher & Flom LLP. As of Sept. 30, 9 percent of those companies were in the consumer goods industry, while 8 percent were industrial goods, according to the report.

In recent instances of involvement by activists, Whitbread Plc agreed to the sale of its Costa Coffee business in August following pressure from billionaire Paul Singer’s Elliott Management Corp. Meanwhile, British bank Barclays Plc remains under pressure from activist investor Edward Bramson to shrink its trading business.

©2018 Bloomberg L.P.