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Brexit disruption 'to spark activist investor interest' in UK

City AM logo City AM 03/12/2019 Jessica Clark
Pro-EU demonstrators protest outside the Houses of Parliament on 30 October, 2019 in London, England. The UK is set to go to the polls on 12 December after MPs backed Prime Minster's call for an early general election and the European Union granted a Brexit etension until 31 January 2020. (Photo by WIktor Szymanowicz/NurPhoto via Getty Images) © WIktor Szymanowicz/NurPhoto Pro-EU demonstrators protest outside the Houses of Parliament on 30 October, 2019 in London, England. The UK is set to go to the polls on 12 December after MPs backed Prime Minster's call for an early general election and the European Union granted a Brexit etension until 31 January 2020. (Photo by WIktor Szymanowicz/NurPhoto via Getty Images)

Disruption from Brexit could spark an increase in activist investors targeting public companies in the UK, a new report has warned.

The UK, which is already Europe’s largest market for activists, is at risk of drawing more attention from investors looking to pile the pressure on management over the coming year.

Professional services firm Alvarez and Marsal has said that disruption caused by Britain’s expected departure of the EU will “lead to greater opportunities for activists in the UK, and a weakening of sterling could prompt greater interest in buyouts and public-to-private deals”.

Video: Brexit: 61 days until Britain is scheduled to leave the EU (Press Association)

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A&M managing director Malcom McKenzie told City A.M: “Activists like disruption because in disruption some management teams don’t manage so well, and a good company becomes poorer. 

“That gives activists an opportunity, when the share price doesn’t represent the value of the company. Brexit is a disruption, and some companies won’t manage their way through that well.”

“When markets suffer any kind of disruption, people react very differently…it is easier for activists to see who is not responding well,” Paul Kinrade, senior adviser at A&M added.

Protestors participate in an anti-Boris Johnson rally in his constituency Uxbridge, west London on November 16, 2019. - Britain goes to the polls on December 12, 2019. (Photo by Adrian DENNIS / AFP) (Photo by ADRIAN DENNIS/AFP via Getty Images) Protestors participate in an anti-Boris Johnson rally in his constituency Uxbridge, west London on November 16, 2019. - Britain goes to the polls on December 12, 2019. (Photo by Adrian DENNIS / AFP) (Photo by ADRIAN DENNIS/AFP via Getty Images)

“Activists are not looking for the weakest companies, what they want is a company whose share price has fallen away.

“If they can see a better route to bringing that change they buy in, they become active and push for that change.”

A&M’s report showed that 54 UK companies are now at risk from activists, rising from 52 in April.

Gallery: Brexit: A timeline (Photos)

However, the UK’s dominance is eroding as activism across Continental Europe gathers momentum.

“As activism becomes more entrenched in European markets, shareholders are increasingly employing activist tactics against boards they disagree with, with traditional institutional investors also taking more vocal stances,” the report said.

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The European market for activism is set to grow next year, with 158 countries on the continent braced for activists, rising from 150 in April. 

Industrials remain a significant sector for activists, but interest in consumer companies continues to decline.

A number of activist campaigns have mounted in the last year, with Ferguson, Imperial Brands and Domino’s Pizza all being targeted in the UK.

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