Yahoo Finance Global effects of shareholder activism to be felt more than ever in the year ahead: JP Morgan
SINGAPORE (Jan 17): With potentially volatile stock prices on the horizon, the impact of activists and shareholder activism – now permanent features of global capital markets – will be felt more than ever in 2019, says JP Morgan.
See: A different notion of shareholder activism
According to the financial services firm’s Global M&A Outlook report for 2019, direct activist assets under management (AUM) stood at US$126.9 billion as at 3Q18.
Out of 234 non-US activism campaigns initiated in 9M18, an estimated 46% targeted European companies, with 32% of European campaigns having at least one M&A-related demand. A significant 29% of activists sought to catalyse a deal by calling for a strategic review of alternatives, a spin-off, split or full sale.
Nonetheless, the firm expects merger and acquisition (M&A) activity to remain strong amid regulatory and geopolitical headwinds this year, with robust activity in the US$1 billion and US$10 billion deals continuing to drive the M&A market.
It also notes that institutional investors have demonstrated an increasing acceptance of activism, with some at least partially adopting a shareholder activism strategy themselves.
Looking into 2019, JP Morgan foresees US campaign activity to remain at levels similar to those in 2018 – while activism outside of the US grows rapidly as activists seek out attractive risk-reward opportunities in Europe and Asia.
The firm also anticipates an emerging trend towards more complex campaigns as activists focus on catalysing strategic and operational change at companies – and embrace the growing importance of environmental, social and governance issues to both active and passive institutional investors.
“As companies have invested more energy in preparing for the prospect of shareholder activism, 2018 saw a heightened willingness to push back against an activist approach; companies are increasingly skeptical of settlement and are becoming more comfortable allowing campaigns to go to a shareholder vote if a reasonable settlement cannot be reached,” notes JP Morgan.
The firm also highlights corporate clarity as one of the key themes driving M&A activity in 2019, as pressure remains on companies to review their business structures and unlock value.
