Friday 28 April 2017

Ireland ripe for activist investors - industry experts

Activist investors typically buy a minority stake in a targeted public company and agitate the board and management for changes they believe will boost shareholder returns (Stock picture)
Activist investors typically buy a minority stake in a targeted public company and agitate the board and management for changes they believe will boost shareholder returns (Stock picture)
Gavin McLoughlin

Gavin McLoughlin

Irish listed companies are likely to attract activist shareholders in the short term, as executive pay draws an increasing amount of attention, according to industry experts.

Peter Reilly, a senior research manager at shareholder advisory firm Glass Lewis said Brexit might provide new opportunities for activists.

"The high 'against' votes we've seen in the UK have definitely translated over here. Investors are global now, the trends are across Europe. Deutsche Bank failed their remuneration vote, you've got two in Italy for the first time, Renault in France, now it's not isolated to the UK, you can see it right across the board," he added.

Steven Balet, head of corporate governance and activist engagement at FTI Consulting's strategic communications arm, said Ireland's regulatory environment is "very permissive for an activist fund to get involved".

"I know activist funds that are looking at the UK and Ireland, as well as Germany, the Nordic countries. I feel very confident in making a prediction that there'll probably be at least a contest or two within the next agm period going through to next August. And once that starts, what we've seen in the UK is that once you break the seal, then other activists start pouring in," he said.

"The activists are slowly starting to say in our survey results that it's getting a bit tighter in the US market for them to operate. You're seeing more than one activist involved in a company, sometimes three or four. So they have to look abroad, and you've seen the first wave come in terms of Valueact [which has obtained a seat on the board of Rolls Royce] and Elliott setting up an office.

"There'd be no reason for them to exclude Ireland. They're probably looking for the right company to make the first activist foray with, and also they want to understand the economy," Balet added.

Activist investors typically buy a minority stake in a targeted public company and agitate the board and management for changes they believe will boost shareholder returns.

Average CEO turnover was 16.6pc within a year for a firm without such an investor, and 30.9pc over two years, an FTI report published this week said, using a set of 2,500 companies.

When an activist gained board seats, chief executives left their firms 34.1pc and 55.1pc of the time in those respective periods, according to the study.

Even if the activist didn't gain board seats, their presence in a company had an effect: 28.5pc of the CEO positions showed turnover within 12 months, and 45.6pc departed within two years.

Activist hedge funds settled for, or won, board seats in 46pc of the more than 300 contests monitored from 2011 to 2015, the report said.

Additional reporting Bloomberg

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