Activist investors keep lower profile in Europe
LONDON (Reuters) - As activist investors launch more high profile corporate battles in the United States, in Europe they are eschewing public hectoring for private talks.
Aggressive activism has had mixed results in Europe, where protracted fights have on occasion driven down share prices and put off other shareholders instead of bringing about the changes the activist investors demand.
The alternative approach for activists is to seek private meetings to effect change in the hope of increasing the value of the stakes they have taken in target companies.
"The level of dialogue with corporates on this topic is the highest we have seen in a long time," said Gilberto Pozzi, head of mergers and acquisitions at Goldman Sachs for the Europe, Middle East and Africa region.
Appetite for activist hedge funds is growing, with 2.5 percent of investors looking to invest in them as of mid-2013 compared to 1.6 percent in 2012, according to data complied by alternative assets research firm Preqin. Activist funds' assets under management total $129 billion.
Battles launched by U.S. fund managers Carl Icahn and Dan Loeb over strategy at Dell DELL.O and Sony (6758.T) have again raised the profile of activist investors globally.
But in Europe, the bigger institutional investors, whose support is vital in any shareholder votes, are less likely to line up behind aggressive actions.
"Mentalities are different," according to Bernard Oppetit, chairman of London-based hedge fund Centaurus. After trying the tougher approach, he now champions a less confrontational style.
"In continental Europe, there is a tacit consensus on the idea that minority shareholders should not have a say in the way companies are managed and are free to sell if they are not happy," he said.
Because of the lower key nature of activist investing in Europe, it is hard to quantify its overall extent.
But the comparison with the United States is stark when it comes to the deals in the public eye. Since 2012, there have been 323 activist actions in the United States compared to only 81 in Europe, according to data from research firm Activist Insight. Europe has more listed companies.
One failure for tougher tactics was the 2011 battle between U.S. hedge fund Elliott Advisers and Swiss biotech firm Actelion (ATLN.VX). The fund lost and Actelion shares fell 40 percent, although they have since recovered.
Activists succeeded in splitting the Dutch postal and express delivery company TNT NV into separate businesses in 2011, but both (PTNL.AS)(TNTE.AS) have since tumbled in value.
More recently, Knight Vinke Asset Management published an open letter calling on Swiss bank UBS (UBSN.VX) to break itself up. After that did not deliver, it is now seeking a private meeting with management, sources familiar with the matter said.
The funds involved in all those actions declined to comment.
Meanwhile, Trian Fund Management tried a softer line with French food group Danone (DANO.PA) in November, despite the fund's brasher reputation in the United States. The 15 percent rise in Danone's share price since then is almost double that in the French CAC40 index .FCHI.
"The purely event-driven activism model has lost credibility," said Harlan Zimmerman, senior partner at Cevian Capital, which says it is focused on "constructive investment".
"A lot of CEOs and boards are convinced that giving in to arbitrageurs vying for quick profits is not necessarily a good idea."
That is not to say the tougher approach has not worked at all in Europe: Sherborne Investors ousted the chairman and CEO of 150-year old fund management firm F&C Asset Management (FCAM.L) in 2010. Shares are up around 90 percent since the fund stepped in.
Public battles can deter more conservative investors, who have no desire to be linked with noisier activists taking a shorter term interest.
Some activist funds now make the promise of changes a pre-condition for their investment, said Alex van der Velden, founder of fund manager Ownership Capital.
"That's a very powerful carrot and you've positioned yourself as an ally," he said.
Whether the softer approach pays off compared to a more aggressive tack is hard to tell from available data.
Overall, however, activist funds returned an average of over 14 percent to investors in 2012 while the average return for Euro Stoxx 50 companies fell nearly 13 percent over the same period.