UK firms suffer 25pc surge in attacks from activist funds

Activist investor attacks on UK companies jumped by a quarter last year despite a lull in activity at the height of the pandemic.

Campaigns rose 25pc to 20 in 2020, according to data from the investment bank Lazard, with the UK recording the highest activity in the whole of Europe.

The sharp climb came despite activism grinding to a halt in the middle of the Covid crisis, when only two campaigns were recorded between April and June.

Activist investors held back attacks over the period as boards focused on surviving the economic turmoil.

Demands for a board seat or the sale of a fringe business unit risked being ignored by a company’s shareholder base when the business was battling to remain financially stable. Yet activity roared back to life in the second half of the year, when 11 attacks were launched against UK companies.

Rich Thomas, head of European shareholder advisory at Lazard, said the bulk of UK activism was driven by “smaller, less established activists broadening their scope and attacking larger companies”.

He added: “Activists are increasingly trying to exert influence over the strategic direction of corporates through specific mergers and acquisitions (M&A), or broader strategic campaigns, emphasising the need for boards and management teams to maintain control of their strategic narrative.”

Research by Lazard found that 70pc of UK campaigns were focused on M&A and around half demanded a shake-up of the boardroom. Activists also used the pandemic as an opportunity to build up stakes in companies that were lagging behind their rivals.

Those which bought stakes are likely to sit on investments for three to six months before issuing their demands.

High-profile activist activity included Cevian Capital’s increased stake in publisher Pearson to 8.5pc in August, signalling a potential push for a board seat.

That was followed by campaigns from PrimeStone Capital in October on medical devices maker LivaNova and wealth manager St James’s Place. Hedge fund Browning West also urged Countryside Properties to jettison its housebuilding arm and hand it a place on the board in November.