Activist Investing in Europe

ACTIVIST INVESTING
IN EUROPE
2019
THE TEAM
SKADDEN is a global leader among law firms involved in mergers and acquisitions and other corporate transactions, and a top
adviser for clients on corporate governance, takeover preparedness, contests for corporate control, proxy fights, and other forms
of shareholder activism. We provide clients with an integrated team from different areas of law, including attorneys from our M&A,
corporate governance, and litigation practices. Our diversity of experience helps clients address the full spectrum of issues presented
by activists and is key to helping our clients prepare for and respond to activist shareholders advocating strategic, financial, or
structural changes.
François Barrière Lorenzo Corte Armand Grumberg

+33 1 55 27 11 45 +44 20 7519 7025 +33 1 55 27 11 95
[email protected] [email protected] [email protected]
Holger Hofmeister Scott Hopkins Matthias Horbach

+49 69 74220 117 +44 20 7519 7187 +49 69 74220 118
[email protected] [email protected] [email protected]
02
CONTENTS
04 ACTIVISM IN EUROPE Josh Black, Activist Insight.
06 COUNTRY PROFILE: UNITED KINGDOM Elana Duré, Activist Insight.
08 LEGAL ANALYSIS: UNITED KINGDOM Scott Hopkins, Skadden.
10 ESG ACTIVISM: A NEW PARADIGM Cas Sydorowitz, Georgeson.
12 COUNTRY PROFILE: FRANCE Eleanor O’Donnell, Activist Insight.
14 LEGAL ANALYSIS: FRANCE Armand Grumberg and François Barrière, Skadden.
16 GOING LOCAL Andrew Honnor, Greenbrook Communications.
18 IN NUMBERS: ACTIVISM IN EUROPE Activist Insight data.
20 A SYSTEMATIC SHIFT Muir Paterson, Citigroup.
22 COUNTRY PROFILE: GERMANY Josh Black, Activist Insight.
24 LEGAL ANALYSIS: GERMANY Matthias Horbach and Holger Hofmeister, Skadden.
26 COUNTRY PROFILE: ITALY Iuri Struta, Activist Insight.
28 LEGAL ANALYSIS: ITALY Lorenzo Corte, Skadden.
30 COUNTRY PROFILE: SWITZERLAND Josh Black, Activist Insight.
32 LEGAL ANALYSIS: SWITZERLAND Mariel Hoch and Fabienne Perlini-Frehner, Bär & Karrer.
ACTIVIST INVESTING IN EUROPE 2019 | www.activistinsight.com | www.skadden.com

03
“
ACTIVISM IN EUROPE
Josh Black, Activist Insight.
At first glance, activist investing looks to have taken a No deal

backward step in Europe. Only 117 Europe-headquartered
companies had been publicly subjected to activist demands Europe’s markets retain their idiosyncrasies but opposition to
in the first three quarters of 2019, according to Activist Insight M&A has been a common theme across most of the major
Online, compared to 134 in the same period in 2018. ones, as well as in the U.S. since the tail-end of 2018. In
Yet that would be a major simplification. While peripheral Europe as a whole this year, opposition to deals accounted
countries have witnessed less public activism, multibillion- for 9% of all demands, compared to an average of 6% since
dollar investments have been announced regularly enough the beginning of 2013. Levels were much higher in some
for a sense of “business as usual” to take hold. Moreover, the markets – one-quarter of this year’s demands in Switzerland,
five countries covered in depth by this report accounted for and 12% in the U.K.
81 of the companies publicly subjected to activist demands
in 2019. That is the second-highest absolute number at the Whether activists continue to oppose M&A into 2020 likely
end of the third quarter and the greatest concentration since depends on who the acquirers are. Activists have tapped
2013. A record year in the U.K., major focus on Germany into dissatisfaction with acquisitive companies, based either
by Elliott Management, and contentious M&A across the on performance or the cost of capital required to complete
continent ensured that activism was again a major theme in deals. By contrast, many activists privately point to private
public markets. equity’s large supply of dry powder and the potential for
public-to-private or carve-out transactions as a source of
Influence at a discount future profits. Companies that combine businesses with a
poor strategic fit or limited exposure to the trade disruptions
Activists aren’t winning every battle. However, given the of either Brexit or U.S. tariffs may make for attractive targets.
great variety in their campaigns – some informed by the A slight dip in the proportion of large-cap ($10 billion and
U.S. experience, others more locally flavored – the level of up) targets and focus on the $2 billion to $10 billion section
sophistication has clearly increased. of the market in 2019 may be an indication of this. Merlin
Entertainments, which sold itself under pressure from
Consider Panalpina World Transport, where Cevian Capital ValueAct Capital Partners, could be an early example of what
ran its first ever proxy solicitation and cleverly cornered is to come. Ferguson, which has yet to outline exactly how it
the company’s largest shareholder to allow a takeover to plans to split itself in two under pressure from Trian Partners,
proceed, or Elliott’s lengthy position papers on its German may be another.
investments. Such tactics have allowed management teams
to retain ultimate responsibility for the businesses under their Getting on board
control but expanded the role of shareholders to include
issues of strategic importance. Board representation – one of the more common public
demands advanced by activists, albeit sometimes as a means
At Barclays, a proxy fight waged by Sherborne Investors to other ends – has ebbed a little in French and Swiss markets
spluttered at times but ultimately gave investors a clearer and grown in importance in U.K. and German ones. Italy
insight into the British high street champion’s investment remains a unique case thanks to its “voto di lista” system,
bank and forced CEO Jes Staley to promise improvements which guarantees minority shareholders representation.
that have started to become visible. At FirstGroup, Coast Thanks to this system, activists in Italy have won 121 seats
Capital was defeated but many of its best suggestions were since 2013 – just shy of the 127 board seats won in the U.K.,
coopted by the board. according to data from Activist Insight Online.
04
“
“While some trends may plausibly
extend into 2020, much depends on the
economic outlook.”
A record number of proxy contests and strong upward trend EUROPEAN TARGETS BY YEAR
in settlements in the U.K. is particularly notable. However,
Pelham Capital’s successful nomination of Christoph Brand
at Scout24, as well as a victory for Othello Vier at Lotto24, 163 160 162
stood out in Germany. Just a few years ago, activists winning
board seats there would have been near-unthinkable. 138
127
The road ahead 113 117
While some trends may plausibly extend into 2020, much 89

depends on the economic outlook. European central banks
are looking to artificially increase liquidity, while the U.K. is
suffering from a triple whammy of Brexit uncertainty, reduced
coverage of smaller companies by sell-side analysts thanks
to European directive MiFID II, and the gating of Woodford
Investment funds. That provides opportunities for bargains
but only for so long. If conditions turn more decidedly
negative that could catch up with shareholders. 2013 2014 2015 2016 2017 2018 2019
Number of Europe-based companies publicly subjected to activist demands.
2019 data as of Sep 30. Figure in yellow box is a 2019 full-year projection.
Continued focus on Germany seems particularly likely.
Recent years have apparently unlocked some of the cultural
reservations around activism; seeing a company like EUROPEAN TARGETS BY SECTOR
ThyssenKrupp struggle through successive bosses indicates
es
Utiliti
are
the hard work ahead. Even so, for activism to take root the
market will have to grow beyond Elliott and Cevian. alt
hc
6% 2019 Fin
He %
6
5% 2018
ds r
an
goo ume
7% Conglomerates
cia
In France, the picture is murkier thanks to strong government

2
27
s
l
Con
antipathy to activism. That will undoubtedly encourage

8%
5%
companies to employ stiffer defenses in some cases,

10%
although it is notable that Pernod Ricard has not. In any

Industrial
goods
case, established players such as CIAM and Amber Capital

9%
will likely ensure that there is at least some presence in years

11%
to come.
19%
Ba rials
9%
U.S. funds who make ventures into Europe have tended 10%
sic
20
te
to repeat their incursions once they establish the lie of the %

ma
11%
Se
vic
land. Others that have yet to make investments have been
r
15% es
prowling for opportunities. Thanks to MiFID II and the revised y
olog
Shareholder Rights Directive, the opportunity set within the Techn
European Union is likely to remain a viable proposition.
Sector breakdown of Europe-based companies publicly subjected to activist demands
between Jan 1, 2018 and Sep 30, 2018, and Jan 1, 2019 and Sep 30, 2019.
Note: Rounding may lead to summation errors.

05
“
COUNTRY PROFILE
UNITED KINGDOM
Elana Duré, Activist Insight.
Activism has increased substantially in the U.K. in 2019. becoming targets of takeovers. And anytime there is a
Forty-seven U.K.-based companies were publicly subjected takeover, there is an opportunity for bumpitrage.”
to activist demands as of September 30, up from 41 during
the same period last year. Headline grabbing M&A-related activism in 2019 included
ValueAct Capital Partners’ push to take Merlin Entertainments
Experts interviewed by Activist Insight for this report private and Cat Rock Capital’s demand that Just Eat merge
attributed the increase to a flock of U.S.-based activists. with an industry peer. Both demands resulted in transactions.
Eleven U.K.-headquartered companies were publicly Merlin sold itself to a Canadian pension fund and the family
subjected to U.S. activist demands at the end of the third that owns the Lego brand. Just Eat is merging with Takeaway.
quarter, slightly down from 12 during the same period last com, although the deal has generated opposition from another
year but up from three in the same period in 2017. Most activist, Eminence Capital, and a rival bid from Prosus.
recently, Nelson Peltz’s Trian Partners pressured Ferguson
to separate its U.S. and U.K. operations. The activist also Advisers were quick to warn that the common English
reportedly wants the plumbing company to move its listing language – though helpful – is not always enough for U.S.
from London to New York. activists to win shareholder support in the U.K., however.
Activists may want to “soften” their tactics and show they
Some say U.S.-based activists are attracted to the U.K. are in it for the long haul, SquareWell Partners’ Louis Barbier
market because it offers fresh opportunities now that all the told Activist Insight.
“low-hanging fruit” in the U.S. has been picked over. Others
say it is an opportune time to invest in the U.K. because “Unwarranted aggressive activism is not respected and
the political uncertainty surrounding Brexit has created a does not sit well amongst the U.K. asset management
valuation gap. community,” Sydorowitz added, noting that activists in
the U.K. must show they have attempted to engage with
“The U.K. is full of really good companies and I think management in a meaningful way before launching a
historically the valuation may have been fully priced,” said campaign.
Cas Sydorowitz, Georgeson’s global head of activism. “With
the Brexit uncertainty, the political tumult is taking some Sherborne Investors failed to convince other shareholders it
valuation off the table.” deserved a seat on the board of Barclays in May; less than
13% of shareholders supported founder Edward Bramson
“I think it’ll continue so long as there is a dislocation of the at the annual meeting. The defeat has been ascribed to
pound,” Michael Henson, a senior consultant with Kepler the activist not providing a detailed plan for improvement
Communications, added, as the falling currency relative to and Barclays’ appointment of a new chairman, given U.K.
the U.S. dollar makes U.K. shares particularly cheap. “It’s an shareholders like to give newcomers a chance to prove
opportunity-rich environment.” themselves.
Connected with that may be a rise in M&A activism. Yet there were also victories. Coast Capital failed to
Activists have advanced 22 M&A demands at U.K. replace six directors of FirstGroup at a special meeting,
companies in the first three quarters of 2019, up from 14 but saw its nominee appointed to the chairman role after
during the same period in 2018. “I think M&A activism Wolfhart Hauser resigned in response to the high level of
is going to be pervasive,” Sydorowitz predicted. “I think shareholder discontent. In total, activists had won 23 seats
that the same reason that U.K. companies are becoming at U.K.-based companies through votes and settlements by
targets of activists will also mean that U.K. companies are September 30.
06
“
“Unwarranted aggressive activism is not
respected and does not sit well amongst
the U.K. asset management community.”
U.K. targets by year U.K. targets by market cap

63
Large c
ap
53 2019 9
%
47 2018
ap
42 15%
oc
Mi
37
dc
0%
Nan
36 %
15%
ap
3
24
29
10%
LARGE CAP: > $10B
22 MID CAP: $2B - $10B
SMALL CAP: $250M - $2B
MICRO CAP: $50M - $250M
NANO CAP: < $50M
17%
2013 2014 2015 2016 2017 2018 2019 34

%
28
Number of U.K.-based companies publicly subjected to activist demands. %
Sm
2019 data as of Sep 30. Figure in red box is a 2019 full-year projection. %
19
ap
al
c lc
ap
cro
Mi
U.K. targets by sector
Market cap breakdown of U.K.-based companies publicly subjected to activist demands
Utilities between Jan 1, 2018, and Sep 30, 2018, and Jan 1, 2019, and Sep 30, 2019.
l lthcare
ia
ustr s Hea
d 2019
In good 4% 2%
51%
6%
5% 2018
goo umer
Fin
2%
ds
an
23
s
cia
30
Con
9%
l
%
Proportion of resolved
34%
public activist demands

7%
made at U.K.-based
ology
companies in 2019*
11%
at least partially
Techn
satisfied. Number of board seats gained

17%
by activist nominees at
U.K.-based companies in
2019*.
$5.5B
s
%
ial
24%
11
er
at
m
28%
asic Se
B rvic
es
Capital deployed into U.K.-
based activist campaigns *Q1-Q3 2019
by Elliott Management
since 2014.
Sector breakdown of U.K.-based companies publicly subjected to activist demands
between Jan 1, 2018, and Sep 30, 2018, and Jan 1, 2019, and Sep 30, 2019.

07
“
LEGAL ANALYSIS
UNITED KINGDOM
Scott Hopkins, Skadden.
As the impending prospect of Brexit (with or without a deal) ValueAct Capital Partners. This was an unusual move from
looms, activist investors continue to take advantage of ValueAct, which has typically favored private discussions,
an increasingly receptive market. Although the number of and shows activists may use unfamiliar tactics if the right
campaigns has declined slightly across Europe compared to opportunity presents itself.
the near-record volumes in 2018, Europe has accounted for
between 15% and 19% of the global total of companies publicly Corporate governance issues have taken more of a back seat in
subjected to activist demands since 2013, according to Activist 2019 but will continue to be a key driver of shareholder activism,
Insight Online data, and the U.K. has accounted for a larger particularly director remuneration. A recent Deloitte report
share of these campaigns in 2019 to date (40%) than in the showed that the average CEO pay at FTSE 100 companies
same period in 2018 (31%). has fallen to its lowest level in five years (3.4 million pounds) as
a result of investor pressure, and a number of companies have
Activists continue to prioritize catalyzing change at companies suffered notable defeats, including Standard Chartered, Ocado,
at the board level, but as in 2018, this approach has had mixed and Standard Life Aberdeen. Although Barclays managed
success. Sherborne Investors’ long-standing campaign at to defeat Sherborne, 30% of its shareholders simultaneously
Barclays to appoint founder Edward Bramson to the board and voiced concerns over CEO Jes Staley’s pension and bonus
convince shareholders that Barclays should focus on its retail arrangements in an annual vote. Similarly, Stagecoach will
arm and drastically shrink its underperforming investment arm be bracing itself for shareholder criticism after influential
was heavily defeated at the annual meeting. shareholder advisory firm Institutional Shareholder Services
(ISS) issued a “red top” alert that the company’s bonus awards
Other campaigns that were defeated by shareholders have seemed “inappropriate” in light of its performance.
been met with compromise. In May, Coast Capital launched
a proxy fight at FirstGroup to replace six of the company’s 11 In August, Burford Capital’s share price went into freefall after
directors, including the CEO. The relationship between the Muddy Waters Research published a series of reports (including
company and its investor quickly soured when FirstGroup took one compiled by ex-CIA operatives) claiming that Burford had
the surprising step of banning Coast Capital from its full-year been egregiously misrepresenting its returns to investors. The
results meeting, despite Coast Capital’s 9.7% stake in the report also criticized Burford’s corporate governance practices
company. In June, shareholders sided with the company and and the suitability of its AIM listing. In response, Burford
voted against Coast Capital’s proposals. However, two board confirmed that its chief financial officer would be replaced,
members who only received a narrow majority of shareholder two new independent directors would join the board, and an
support subsequently agreed to step down, and FirstGroup additional listing in the U.S. would be sought to help bolster
appointed Coast Capital’s proposed chairman. investor confidence in the company’s governance.
In February, Hammerson settled with Elliott Management and Finally, it is worth noting that environmental, social, and
agreed to appoint two independent directors and establish a governance (ESG) issues continue to be prominent both in
new investment and disposal committee to help implement the the news and amongst investors, and companies should be
company’s aggressive divestment strategy. very much aware that activists may use such issues as levers
to pressure a target company or sway other shareholders.
In line with a wider global trend, M&A remains a key focus in the We will see the first reporting under the U.K.’s new Corporate
U.K as activists seek to leverage transactions as opportunities Governance Code in 2020, and it will be interesting to see
to generate value. In June, Merlin Entertainments agreed to how companies address the Code’s revised principles, which
be taken private by a consortium of investors following private include a focus on company culture and their contribution to
and then public entreaties from its second-largest shareholder, wider society.
08
“
“Statistics do not show that collective
engagement is reducing the amount of
public activism.”
An interview with Scott Hopkins.
Has private or public activist activity increased in the contested shareholder votes on such matters. The impact of
past year? high-profile pressure and lower levels of shareholder support
(with around one-in-six FTSE 250 companies suffering
The steady increase in activist activity in the U.K. in recent years low votes on their annual remuneration report) has had a
looks set to continue, despite a slight decline across Europe particularly demonstrable effect, with CEO pay amongst FTSE
compared to 2018. The number of U.K. companies publicly 100 companies at its lowest level in five years. While climate-
subjected to activist campaigns in the first three quarters of related pressure is widespread, we believe the social in ESG is
2019 increased by 15% compared to the same period in 2018, likely to attract increasing attention.
enlarging the U.K.’s share of companies targeted worldwide.
Why have activists struggled to win proxy fights? Is
Is collective engagement reducing the amount of this comforting for issuers?
public activism?
The outcome of proxy fights is not necessarily indicative of
The notion of “collective engagement” is much more advanced a lack of activist-induced change within companies due to
in the U.K. than in the rest of Europe. The Investor Forum, the softer options available, including private negotiations
in particular, has been instrumental in facilitating dialogue and settlement. This is most clearly demonstrated by the fact
between institutional investors and companies. Statistics do that prominent activist situations have settled without a fight.
not show that collective engagement is reducing the amount Uncertainty caused by recent geopolitical tensions may have
of public activism, but rather that activists have now figured increased companies’ willingness to resort to settlement, while
out a way of operating within the U.K. that differs slightly from indications that activists are struggling to create value against
their U.S. methods. We have seen a better understanding of benchmark indices in the U.K. may have encouraged a change
campaign tactics by U.K. investors and a greater willingness of tack.
on the part of investors to vote against the board.
Do companies have adequate remedies against
Should companies be worried about an increase in activist short sellers?
campaigns from U.S. activists?
Despite EU-wide regulation requiring the disclosure of short
It is increasingly important for companies to be cognizant of, selling, the number and impact of short positions can be
and well-prepared for, activist campaigns, whether instigated difficult to gauge. A recent European Securities and Markets
by U.S. activists or others. Headlines provoked by rising U.S. Authority study shows that many investors avoid crossing the
activist attention provide an obvious reminder of this fact, public disclosure threshold in order to keep their strategies
and directors of U.K. companies are increasingly mindful of under the radar. In the U.K., the Financial Conduct Authority
the potential threat this poses. Activism and, more broadly, does have broad powers to address adverse events that pose
shareholder engagement are now fundamental parts of the a serious threat to financial stability or market confidence;
U.K. market, and companies are expected to be in constant however, it does not currently have any short selling
dialogue with investors and other stakeholders. restrictions in place. In the event of a short attack, companies
should respond quickly and effectively to rebut the short
What corporate governance issues should companies seller’s arguments and proactively engage with investors to
be most aware of? gauge if the attack is gaining traction.
Remuneration and environmental, social, and governance

(ESG) issues are in the spotlight, with many companies facing

09
ESG ACTIVISM: A NEW PARADIGM
Cas Sydorowitz, Global Head of Activism at Georgeson.
Shareholder activism is simple in some respects; it support their initiatives formally or informally. Signatories
originates from one or more shareholders that want to to the UN Principles for Responsbile Investment are being
initiate change that will create economic value either by called out for not supporting environmental resolutions.
increasing the share price or by returning cash to investors.
The activist needs to convince other shareholders and Climate Action 100+, for example, is targeting the 100 largest
proxy advisers to buy into its value creation plan and vote carbon emitters to push them to improve their disclosure
for its proposals. and take action to reduce greenhouse gas emissions across
their value chain. Unfriend Coal wants insurers to stop
In the emerging world of environmental, social, and covering companies involved in coal extraction and coal-
governance (ESG) activism, things are less clear. It is not powered thermal power plants. Both organizations recruit
obvious who the beneficiaries are and how many shares institutional investors to sign up and engage with companies
they speak for. Their objectives can be at odds with to push their agendas. The pressure comes not only from the
shareholders whose primary focus is return on investment. shareholders that back them but the publicity they create as
With ESG activism, the stakeholders are far more diverse part of their social mission.
and less obvious.
Traditional activists are getting involved in ESG-focused
As climate change takes a more prominent place in politics products, with firms such as ValueAct Capital Partners
and corporate discussions, the media has focused first and Jana Partners creating ESG products to attract more
on global school strikes, giant personalities such as Greta of the investible universe. Jana and ValueAct have hired
Thunberg who speak out against politicians in strong, experienced portfolio managers to demonstrate their
forceful language, and the Extinction Rebellion protests. commitment to ESG investments.
ESG activists follow a similarly offensive approach. Their It is getting more complicated for companies, with pressure
tools are not investor slide decks or shareholder letters. coming from a more diverse universe of stakeholders. With
Instead they use images of glaciers breaking off and sea pressure groups using shareholders, the media, and the
life getting wrapped up in islands of plastic. Rising global public to push for change, it is increasingly difficult to stay on
temperatures and extreme weather patterns have hence top of the times. Shareholders are only one stakeholder, one
caught the attention of decision makers within corporates whose influence seems to be waning in the growing theater
and politics and importantly within the asset management of ESG activism.
industry.
“
Politicians are looking at what they should be doing from
a regulatory perspective on what companies should be
disclosing in terms of key metrics on carbon emissions,
environmental impact analysis, and material ES risks to
businesses. Companies are responding to countless
surveys from ESG rating agencies or indices trying to figure
out which ones are relevant. These questionnaires take a
“With ESG
huge investment in time, so companies have to prioritize activism, the
which ones they respond to. stakeholders
are far more
Concurrently, there is an ESG gold rush with investors,
NGOs, and activists all looking to capture a piece of the new
diverse and less
or additional money flowing into ESG-focused products. obvious.”
Investors do not need to have their own ESG products but
the man in the street is looking at their money managers to
take a stance on key issues and get involved in campaigns
initiated by various NGOs, such as Unfriend Coal or Climate
Action 100+. This is a growing field that companies need to
be aware of because these organizations don’t own shares Cas Sydorowitz
themselves, but recruit the largest institutional investors to [email protected]
10
There’s more to ESG than meets the eye.
Georgeson’s ESG Radar helps identify and deliver deep insight into the various environmental, social and
corporate governance stakeholders. Learn more at georgeson.com

“
COUNTRY PROFILE
FRANCE
Eleanor O’Donnell, Activist Insight.
The number of France-based companies targeted by activists up call for French companies. According to Dubois, more
is on course to hit a record number in 2019, after meeting shareholders are now recognizing activism as a strong market
or exceeding 2017’s and 2018’s full-year totals. Ten French force. Campaigns have become frequent as a result. “More and
companies were publicly subjected to activist demands year- more shareholders are supporting them because they agree
by the end of September, compared to only seven in the same with their concerns,” he noted.
period last year, making France the third-busiest country for
activism in Europe this year after the U.K. and Germany. Paris and London-based CIAM co-founder Catherine Berjal
echoed Dubois’ sentiment, adding that corporations have
Increasing activity recently pushed the Finance Commission been reluctant to recognize activism but are starting to realize
of the French National Assembly to publish a report that they have to start making changes. “Six years ago, it was
recommending reforms to securities markets regulations shameful to be an activist in France but today it is becoming
regarding shareholder activism and market transparency. One more natural,” she commented. “Corporations and politicians
recommendation is to reduce the threshold for disclosure have begun to understand that we are here, and we don’t
of equity ownership from 5% to 3%, while another is for intend to stop what we have begun.”
heightened regulation of short trading.
The increase in activism has been complemented by an
Although activism is increasing in France, Amber Capital increase in non-traditional activists speaking up. According
Managing Partner Joseph Oughourlian told Activist Insight that to Dubois, “That’s very new. In the past it was unusual
it is still limited compared to the U.S. and the U.K. due to a to see traditional investors go public with demands and
significant information advantage for corporates when it comes speak to other shareholders to get their support.” In May, a
to identifying their entire shareholder structure. “Moreover, group of institutional investors led by Comgest and PhiTrust
corporates spend a lot of money to defend themselves against failed in its attempt to place two nominees on the board of
activist campaigns, and it is their shareholders who are EssilorLuxottica in an effort to break the firm’s governance
bearing all these expenses,” he said. deadlock.
“In most of the activist situations we get involved in, corporate The nominees were put forward after the leaders of Essilor and
governance is dysfunctional, with the board of directors or Luxottica failed to agree on the next CEO, each holding eight
supervisory board not fulfilling their duties,” Oughourlian seats in the merged company formed late last year. Despite
added. “We need more engaged board members who the institutional investors’ defeat in a proxy contest, Third Point
challenge management even if this is not well perceived within Partners has since begun pushing for governance changes to
boardrooms.” end the power struggle at the company.
Among the new campaigns are some high-profile situations, Dubois says French companies need to think more long-
notably Elliott Management at spirits producer Pernod Ricard. In term regarding strategy and engage regularly with long-term
December 2018, Elliott disclosed a 2.5% stake in the company shareholders. “The solution for companies is not to start
and expressed concerns about the Ricard family’s influence thinking like short-term investors. They need to engage with
and the lack of board independence. Since then, the board has long-term shareholders as partners, as they can provide
appointed two new directors, announced a 1-billion-euro share support in the face of an activist.” The adviser explained that
repurchase program, and considered selling its wine division. environmental, social, and governance hooks are good angles
of attack for an activist, as they can garner the support of
Edouard Dubois, a partner at SquareWell Partners, told Activist institutional investors if companies have not already built a
Insight that Elliott’s involvement at Pernod has been a wake- relationship with their shareholders.
12
“
“Six years ago, it was shameful to be an
activist in France but today it is becoming
more natural. Corporations and politicians
have begun to understand that we are
here, and we don’t intend to stop what we
have begun.”
FRENCH TARGETS BY YEAR FRENCH TARGETS BY MARKET CAP

13
p
12 ro ca
Mic
11 2019
10 10 10%
9 2018
10 ap
14% ap
La
14%
c
rg
all
ec
%
c
Sm
no
30
ap
Na
%
LARGE CAP: > $10B
5 MID CAP: $2B - $10B
29%
2 NANO CAP: < $50M
43
2013 2014 2015 2016 2017 2018 2019
%
Number of France-based companies publicly subjected to activist demands.
2019 data as of Sep 30, 2019. Figure in red box is a 2019 full-year projection.
50%
cap
FRENCH TARGETS BY SECTOR
Mid
ities
Market cap breakdown of France-based companies publicly subjected to activist demands
Util
2019
Se
10%
rv
ic
2018 20
10 are
es
14%
13%
c
lth
%
%
Hea
0
29
%
Technology

10%
made at France-based
Consum
29%
companies in 2019*
20%
at least partially
satisfied. Number of board seats gained
e
14%
r goo
by activist nominees at
%
France-based companies
ial
10
ds
nc
$1.6B
14% in 2019*.
a
in
F
20%
Indust
rial goods
Capital deployed into France-
based activist campaigns
*Q1-Q3 2019
by Southeastern Asset
Sector breakdown of France-based companies publicly subjected to activist demands Management since
between Jan 1, 2018, and Sep 30, 2018, and Jan 1, 2019, and Sep 30, 2019. 2014.

13
“
LEGAL ANALYSIS
FRANCE
Armand Grumberg and François Barrière, Skadden.
Activist campaigns in France have returned to past levels after Logistics acquired an 86.2% stake in XPO Logistics Europe in
a slower 2018, according to Activist Insight Online. There have 2015, and attempted to reach the 95% threshold to request
been 10 companies publicly subjected to activist demands as a squeeze-out, but was prevented from doing so by the 7.9%
of the end of September, including a campaign launched by stake held by Elliott Management in XPO Logistics Europe.
Amber Capital at Suez and CIAM’s opposition to the potential Apparently, Elliott Management does not intend to sell its
merger between Renault and Fiat Chrysler. Although activist shares and still appears to be active in the company (most
campaigns have increased, many have not been successful, recently, it submitted a proposal for consideration of the
including the campaign launched by CIAM at Scor. In addition, appointment of a new member of the board). The lowering of
recent legislation may create headwinds for activism in France. the threshold could potentially allow XPO Logistics to finally
launch a squeeze-out.
PACTE Act: The May 22 Act No. 2019-486, relating to the
growth and the transformation of companies (the PACTE In addition, the PACTE Act also implemented in France the
Act) reduced the squeeze-out threshold for listed companies EU Directive 2017/828 of May 17, 2017, adopted in order
to 90%, from 95% previously, aligning it with the existing to reconcile shareholders’ rights and efficient corporate
threshold in 23 EU countries. governance by transposing, among others, the following into
French law:
In addition to the modification of the threshold level, the PACTE
Act modifies prima facie the computation of the threshold. It Approval of the remuneration policy for directors by
replaces the terms “95% of the share capital or voting rights” shareholders and preparation of an annual remuneration
with “90% of the share capital and voting rights,” which report: This should result in increased transparency and
appears to add an additional requirement to cumulate the should thus abate public demands or resolutions by activists
capital and voting rights. In reality, however, this amendment regarding executive pay. Such demands are quite common in
is simply proscribing the Financial Markets Council’s (CMF) activist campaigns, either to oust the directors or as a mere
position, which has also been applied by its successor, the political move to disrupt the governance of companies.
Financial Markets Authority. The CMF has considered, in its
decision regarding Sté GLM, dated July 29, 1999, that the Enhanced transparency of proxy advisers: Proxy advisers will
95% threshold should be computed with respect to both the now be under an obligation to publish their code of conduct
share capital and voting rights. and the relevant feedback regarding its implementation,
applying a “comply or explain” principle.
The reduction of the squeeze-out threshold should in principle
limit purely opportunistic shareholder engagement, where the Woerth Report: In October 2019, the Committee on Finance
sole purpose is to block the squeeze-out in order to negotiate and General Economy of the French National Assembly issued
better financial terms for the relevant transaction; indeed, such a public report (the so-called Woerth Report) with respect
an engagement would be more costly (requiring an acquisition to shareholder activism, which recommends increasing the
of a 10% stake instead of a mere 5%), and thus more risky. supervision of short selling and securities lending by increasing
It should also result in the launching of more public takeover the transparency requirements (e.g. lowering the first
offers, as there will be a higher probability of achieving a ownership declaration threshold from 5% to 3%, or including
squeeze-out. additional debt securities to determine whether thresholds are
crossed), granting additional emergency powers to the French
As a matter of illustration, in the past, Elliott Management Financial Market Authority, and authorizing listed companies to
managed to block the squeeze-out of XPO Logistics Europe make certain disclosures even during blackout periods.
(formerly known as Norbert Dentressangle). Indeed, XPO
14
“
“Although activist campaigns are at
joint-record levels, most have not been
successful.”
An interview with Armand Grumberg and François Barrière.
Has private or public activist activity increased in the crucial for boards to be as transparent as possible with their
past year? shareholders about the governance of the company, including
the role of board committees, and to communicate regularly
The number of companies publicly subjected to activist with their shareholders in order to retain their support during
demands has strongly increased in France after falling in 2018. general meetings.
To the best of our knowledge, private activist activity has also
increased in 2019. Activism is expected to remain at the same Should companies considering participating in M&A
(high) level or even increase. Although activist campaigns are be wary of activists?
at joint-record levels, most have not been successful, including
the campaign launched by CIAM on Scor, or the attempts of In a large number of cases, activists build stakes in a company
PhiTrust, Sycomore Partners, and Valoptec Association to gain participating in an M&A transaction. Indeed, activists can
board representation at EssilorLuxottica. negatively influence M&A transactions through various means,
including public opposition to the relevant transaction or
Can activism thrive despite the hostility of the threatening to block a squeeze-out. This kind of shareholder
government? engagement will now be prevented, in part, by the lowering of
the threshold for a squeeze-out to 90%.
Although the PACTE Act implements provisions which aim —
to some extent — to prevent shareholder activism, activists However, activists can still intervene earlier in the transaction
continue to use legal rights granted to shareholders in order and simply oppose its terms and/or gather the support of
to implement their campaigns. Legislation can provide other shareholders. For instance, this year, Sterling Strategic
companies with increased transparency and thus help prevent Value opposed the takeover terms of Searchlight Capital
campaigns from gaining the support of other shareholders, Partners to acquire Latécoère, arguing that the offer did
but it can hardly prevent the launching of activist campaigns not reflect the growth opportunities of the company; CIAM
altogether. The Committee on Finance and General Economy released a letter sent to the board of Renault in June 2019
of the French National Assembly issued a report (the so- claiming it would strongly oppose Renault’s contemplated
called Woerth Report) with respect to shareholder activism merger with Fiat Chrysler; and Elliott Management has
in October 2019, containing certain recommendations announced that it holds 9.5% of Altran’s share capital and
and underlining that – while it is healthy for shareholders opposes Capgemini’s takeover terms.
to be active and engage in a strategic dialogue with listed
companies – such engagement may be excessive or even Has executive remuneration continued to be
harmful in certain circumstances. As laws and regulations are controversial?
adopted and corporate awareness grows, activist campaigns
may become increasingly unsuccessful. This seems to be the Executive remuneration has been widely approved in the
trend over the past year: out of 15 public demands by activists French-listed companies composing the CAC 40, even if the
this year, two have been successful. approval rate dropped to 82% from 90% last year. However,
prominent activists have continued to criticize executive
What corporate governance issues should companies remuneration. For example, CIAM unsuccessfully urged
be most aware of? shareholders to vote against the remuneration of Scor’s CEO
for 2018 (ex-post) and 2019 (ex-ante).
The primary focus of shareholder activists in France has
been to either remove the chairman/CEO or other board
members, and/or to gain board representation. It is thus

15
GOING LOCAL
How U.S. activists should adapt in Europe, by Andrew Honnor, founder and managing partner of
Greenbrook Communications.
The stereotype is a familiar one: North American activists are U.K. fund manager M&G nominated its first ever dissident slate
noisy corporate raiders and their European counterparts are of directors to the board of Canadian chemicals company
measured constructivists. Methanex this year. Progressive managers such as Janus
Henderson have also publicly backed activists’ involvement,
Though perhaps true at one point in the not-so distant past, praising ValueAct for “shining a light” on Rolls-Royce’s value.
this stereotype has run its course. Not only is the definition of Others like them are increasingly open to hearing a fellow
what constitutes “activism” evolving, investors are increasingly shareholder’s views, which makes the European landscape
adapting their approach to fit local markets, as several leading more palatable for activist investing than ever before.
North American firms have demonstrated in the U.K., Europe,
and Japan to great effect (ValueAct Capital Partners at Freedom of the press
Rolls-Royce Holdings, for example). Those less interested in
abandoning their “one size fits all” approach have seen mixed The European media has become more nuanced in its attitude
success. toward activism. Investors from “over there” are no longer
immediately painted in a negative light. Activists are forensic in
A common simplification of this localized adaptation is a pinpointing the weaknesses of a company, offering a viewpoint
general tempering of one’s approach and striking of a more the media may often be willing to endorse. Commentators are
conciliatory tone. Though helpful to an extent, an inherent increasingly open to hearing the evidence and giving a fair trial.
skepticism still exists of the “wolf in sheep’s clothing.” What Despite this, the subtleties are often still lost, particularly on the
then are the most important, practical nuances for North U.K.’s dogged tabloid press. North American investors should
American funds to consider when investing across the pond? not always expect the benefit of the doubt – a thick skin is
advised.
An increasingly sophisticated market
One must also consider the growing prevalence and
North America is undoubtedly a more mature market for sophistication of digital media, including the use of targeted
activism than Europe, where a burgeoning scene is still social networks and search engine optimization, now an
developing. Whilst European corporates were once hopelessly increasingly common component of European campaigns.
ill-prepared for an activist appearing on their shareholder
register, this is changing. With more activity comes more Specialist local advisers can help investors navigate these
advisers – Europe’s activism defense market is growing, with cultural nuances. My firm has advised on many of the most
investment banks setting up or expanding teams dedicated high-profile engaged shareholder campaigns in Europe over
to this practice or, dare I say it, communications specialists the last five years.
emerging with significant experience of handling activist
campaigns. More corporates are willing to pay for boutique Though these local nuances require careful navigation by
advice and scenario planning to prepare for, and pre-empt, the North American investors, there has undoubtedly never been
possibility of a shareholder campaign. such an abundance of attractive opportunities for engaged
shareholders in Europe. As attitudes continue to mature, I am
North American funds expecting to simply blindside sleepy confident we will continue to see more U.S. investors enter the
“
corporates as they perhaps once could should think again and European market.
plan accordingly.
New-found friends
The attitude of traditional long-only investors continues to “North American

evolve, some more so than others. Whereas many managers investors should not
may have previously viewed the actions of North American
activists as tiresome at best, today some are far more willing
always expect the
to publicly endorse campaigns, particularly if the intention benefit of the doubt – a
is to push management teams into delivering improved thick skin is advised.”
performance.
16
TAKE CENTRE STAGE
PROFESSIONAL CO-BRANDED REPORTS
The mostIN-HOUSE
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FOR YOUR ORGANIZATION
of activist situations worldwide
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OPPORTUNITIES WITH ACTIVIST INSIGHT
IN NUMBERS
ACTIVISM IN EUROPE
EUROPEAN TARGETS BY MARKET CAP KEY 2019 CAMPAIGNS

U.K.
Larg
o cap 2019 ec
a 12 Sherborne Investors at Barclays
n 15% p 11 ValueAct Capital Partners at Merlin Entertainment
Na 17% 2018
16%
17% 50
4
25 FRANCE
1
Elliott Management at Pernod Ricard
15 1 Amber Capital at Suez
LARGE CAP: > $10B
MID CAP: $2B - $10B 18 5
210 43
Micro cap
78
16%
SMALL CAP: $250M - $2B GERMANY

19%
18%
Mid cap
25%

1 Elliott Management at Bayer
NANO CAP: < $50M 3 Elliott Management at SAP
39 11
38
5 SWITZERLAND
13
32%
Cevian Capital at Panalpina
25% 34 1 Freenet at Sunrise Communications Group
Small cap
2 21 6
Market cap breakdown of Europe-based companies publicly subjected to activist demands between Jan 1, 2018 and
Sep 30, 2018, and Jan 1, 2019 and Sep 30, 2019.
2 ITALY
Number of companies publicly subjected to
Vivendi at Mediaset
activist demands by company HQ location Vivendi at Telecom Italia
EUROPEAN TARGETS OF U.S. ACTIVISTS between Jan 1, 2013, and Sep 30, 2019.
4
37 ACTIVISM IN THE CORE EUROPEAN COUNTRIES
SETTLEMENTS FOR BOARD PROXY CONTESTS REACHING A
SEATS IN EUROPE VOTE IN EUROPE 2019 Co
pe
26 2018
31 uro
re
25 21 27 2017
c
20
of E
42% %
ou
22
ntrie
20 20 20
Rest
19 22 %
15
16 57
s (U.K., Fra
46%
43
16
54%
58%
12
%
69 , G
nce
%
er
d) ma
2013 2014 2015 2016 2017 2018 2019 2018 2019
ny,
2018 2019 Italy, Switzerlan
Number of Europe-based companies publicly subjected to activist demands by U.S.-based activists. Number of settlements for board seats at Europe-based Number of proxy contests that went to vote at Europe-based
2019 data as of Sep 30, 2019. Figure in yellow box is a 2019 full-year projection. companies. 2019 data as of Sep 30, 2019. Figure in companies. 2019 data as of Sep 30, 2019. Figure in yellow box
yellow box is a 2019 full-year projection. is a 2019 full-year projection. U.K.-, France-, Germany-, Italy-, and Switzerland-based companies publicly subjected to activist
demands as a proportion of all Europe-based companies targeted. All data is Q1-Q3 each year.
18 ACTIVIST INVESTING IN EUROPE 2019 | www.activistinsight.com | www.skadden.com

19
A SYSTEMATIC SHIFT
Muir Paterson, Global Head, Shareholder Advisory Group, Citigroup.
What is driving the “globalization” of shareholder financial crisis of 2008/9, phrases like “protectors of corporate
activism? governance” and “proponents of value” have slowly become
more common for (some) activists. This shift of tone has been
Looking back at history, shareholder activism has always been driven in an important way by a changing attitude among
global and has been a persistent phenomenon since the early governments and regulators (both national and regional) that
vestiges of the capital markets. Benjamin Graham (the “father” have started to question the historic environment of deference
of value investing) was famous in the 1920s for waging a proxy to corporate boards.
fight against Northern Pipeline to return capital to shareholders,
and more recent “pioneers” of activism (including Martin Ebner The development of national Stewardship Codes (e.g. U.K. -
in EMEA, Carl Icahn in the U.S., and T. Boone Pickens in Asia) 2010) codified expectations that investors should be engaged
grew more prominent with the growth of global capital markets and repositioned being ”more active” as something that should
in the 1980s-2000s. be viewed as a positive shareholder force. While there are
exceptions, and this change of tone is emerging at different
However, it is fair to note that the level of activism activity grew speeds across Europe, the trend is clear.
much faster in the U.S. after this period and levels of activity in
other regions of the world have only recently started to catch up. A less visible, but equally important factor, has been the impact
One key factor was the relative growth of the U.S. capital market of the systemic shift (and flow of capital funds) from active to
versus the rest of the world during this period; the U.S. share of passive investment management. This shift has substantially
the global market capitalization grew from 25% in 1990 to over intensified the focus of capital providers on fund fees and
50% in 2018 (for comparison, Japan evolved from 40% share in performance, creating real pressure for asset managers to focus
1990 to around 8% in 2018). Coupled with the fact that Europe on active solutions for underperforming investments. Increased
and Asia had a higher proportion of controlled companies, there engagement with companies, and the resultant scrutiny of
was naturally a greater volume of potentially actionable targets, performance, capital allocation, and strategic actions, has
and therefore market opportunity for activism, in the U.S. become an important part of many funds’ value proposition. As
investors are challenged for returns, they have become more
Another key factor was the relatively limited right of shareholders willing to push for change and/or align themselves with an
to take action in the U.S., compared to Europe and Asia. activist thesis or alternative strategies.
Investors therefore needed to agitate publicly through
shareholder proposals and proxy fights to bring U.S. corporate Encapsulating both these trends is also a systemic generational
governance to closer parity with the rights of investors in other shift where many investors that have grown up as witness
parts of the world. to high-profile corporate governance scandals, increasingly
consider active engagement as part of their core mandate,
Beyond the practical effect of these public campaigns resulting in further potential alignment with activism. An
“branding” the U.S. as the epicenter for activism, it was arguably important practical effect of this growing support from
this factor that led mainstream investors to be more supportive mainstream investors is a reduction in the need for activists
of activism earlier in the U.S. as investors recognized the need to rely on public pressure and attack campaigns to pursue
to press for change. For example, the formation of the Council change, and in some select situations, has even blurred the line
of Institutional Investors (CII) in 1985 was an early foothold in this between mainstream and activist investors.
effort. In contrast, investors in other regions already had many
of those shareholder rights and had evolved over time to be
more used to private engagement with companies. As a result, How might the shift to passive investment affect
investors in Europe may have been slower to support activism, shareholder activism?
but it is the more recent shift of investor sentiment and growing
acceptance of activism in Europe that is now at the root of the As the flow of capital into activist funds has slowed recently and
re-globalization of activism. variations in performance have triggered some redemptions,
the shift toward passive investment is likely to have more of an
What is driving the growing “acceptability” of impact arguably on shareholder activism going forward than it
activism? has historically.
Activists have been called many things over time, including Growth in activism over the next 10 years will be influenced
“raiders” and “locusts,” but since the governance scandals and heavily by the changing attitudes (and composition) of the
20
investor base toward more active engagement with companies. with an underlying trend of increased active engagement.
One notable effect of the shift to passive investment is greater The fundamental shift of asset managers toward being more
concentration of public company ownership among a small actively engaged with their portfolio companies and challenging
handful of institutions, resulting in greater concentration of decisions made by boards is a systemic shift that is here to stay.
the proxy vote and thereby influence on director composition,
strategy, and capital allocation. Another important effect will be We have touched earlier on many of the factors that have
a larger market podium from which index funds will be able to shaped and supported the growth of activism over the last few
advance developments in corporate governance and policies years and these trends are deeply rooted and arguably only in
related to sustainability, both of which have been core focal their early stages. Certainly, the focus and form of activism will
points for these funds historically. continue to evolve, but companies in Europe (and the rest of the
world) will have to continue to adapt their actions and approach
Will activism continue to grow? in what will continue to become a more challenging investor
marketplace within which to operate.
Although much of the activity occurs in private and activism
occurs in different forms, we expect activism to ebb and flow
Citigroup | Shareholder Advisory Group

Thanks to its global reach combined with a strong and pluridisciplinary investment banking franchise,
Citigroup is a key strategic partner to its clients and our bankers have advised in over 200 activism
defense and contested M&A situations. Through our dedicated Shareholder Advisory Group, we employ
a tailored and hands-on approach to anticipating, containing, and responding to activist or hostile/
unsolicited approaches. This includes a seamless integration across the full Citigroup global platform,
including leveraging our leading sector coverage, M&A, and capital markets teams.
The Citigroup team has notable recent successes for our clients over the last 24 months, including
advising on some of the largest and most complex M&A defense situations in Europe. As the M&A
environment gets more challenging, Citigroup has extensive expertise and the capabilities to offer a full
suite of solutions to its clients.
Defence Sellside + Defence Defence
• Citi acted as defence adviser to SCOR in • 2nd largest healthcare and 4th largest • Successful defence assignment - Smurfit
relation to Covea’s unsolicited approach cross-border deal in history remained independent after a three-
month pursuit and two proposals
• SCOR remained independent after a high • Shire shareholders got a 64% unaffected
profile four-month public battle premium while retaining ~50% ownership • “Smurfit handled the situation perfectly
throughout” - The Sunday Business Post
• Longstanding adviser to Shire, advising on
~$200B worth of deals in last six years
“
COUNTRY PROFILE
GERMANY
Elliott Management made a series of bold commitments companies have reacted cautiously. “Self-help, operating
to the German market over the last 12 months, including improvements will need to be accelerated” if the economy
investing north of a billion euros in each of SAP and Bayer, flatlines, says Hufnagel. “The opportunities have been there.
and nearly 400 million euros in Scout24. That has helped People are starting to go after them.”
raise the profile of activist investing in the country, according
to Till Hufnagel of Petrus Advisers, a London-based activist Klaus Röhrig, a partner at Luxemburg-based Active
that invests across Northern Europe. Ownership Capital (AOC), suggests successful activism
in Germany requires that each side knows what to expect
“Not a day goes by when there isn’t a discussion of one of and understands the other. “To obtain the right balance of
the larger targets in the press,” Hufnagel told Activist Insight competencies and skills on the supervisory board, we must
in September. As a result, companies are starting to adopt understand the company’s mission as well as its value-
a less resistant approach to activists, engaging at an earlier creation plan,” he told Activist Insight for this report. “AOC
stage, he adds. has a longstanding track record of following through on our
commitments. This provides an excellent basis for finding
It has been a long-time coming. Elliott has only gone common ground with all companies that we encounter.”
one calendar year without taking an activist position in
a German company since at least 2011 and has a track Recently, the only successful proxy contests have been
record of pushing for breakups and higher consideration in where the activists held a more than 30% stake, as at Tele
takeovers. Columbus (despite opposition from hedge fund Alatus
Capital) and Lotto24. And while a breakup is often the
Elliott’s campaigns have typically been run out of its London obvious answer, securing one is often beyond an activist’s
or New York offices, often depending on the target’s sector. capabilities. Efforts by Elliott and Cevian Capital to reshape
There are no guarantees that those out of the U.K. will ThyssenKrupp were hit first by concerns that the European
be gentler; after a failed sales process, Scout24’s CEO Commission (a branch of the European Union) could block
Tobias Hartmann received a long and stern letter telling the merger of its steel unit with Tata Steel on antitrust
him, “The past year was fraught with poor judgment and grounds, and then union opposition to a special dividend.
suboptimal communication.” In contrast, SAP received
praise from Elliott’s New York-based partner, Jesse Cohn, Those hurdles came even after a change in the engineering
for announcing share repurchases and steeper operating company’s leadership. ThyssenKrupp is now planning to
targets. divest its elevator unit, reportedly drawing private equity
interest, and sell some cash-burning businesses.
Elliott is far from the only activist to see Germany as an
attractive place to invest. Sixteen German companies Meanwhile utility company Uniper finally overcame
received public demands from 20 different activists in the obstacles relating to its Russian assets to move forward
first three quarters of 2019. with a takeover by Finland’s Fortum. Knight Vinke’s
proposals to break Uniper in two were set aside at the
One reason Germany may be facing such high levels of annual meeting in May, while Elliott withdrew a proposal
activism is that the market has barely advanced in three that Fortum should establish a domination agreement to
years of heightened activism. Until recently, the Dax stock consolidate power over Uniper. The activists sold their
index was well below its 2017 peak, despite recent rallies, stakes to Fortum in October.
and with the exception of much-battered Deutsche Bank,
22
“
“Elliott is far from the only activist to see
Germany as an attractive place to invest.”
GERMAN TARGETS BY YEAR GERMAN TARGETS BY MARKET CAP

20
18 18 18 cap Lar
no
Na 2019 ge
16 13%
c
15 19 ap
2018 %
13%
12 12
cap
13%
Micro
33%
13%
LARGE CAP: > $10B
MID CAP: $2B - $10B
Mid cap
1 9%
NANO CAP: < $50M
2013 2014 2015 2016 2017 2018 2019 % 13

Number of Germany-based companies publicly subjected to activist demands.
27 %
2019 data as of Sep 30. Figure in yellow box is a 2019 full-year projection.
38%
p
GERMAN TARGETS BY SECTOR
ll ca
Sma
rvices
e Se
Market cap breakdown of Germany-based companies publicly subjected to activist
ar demands between Jan 1, 2018, and Sep 30, 2018, and Jan 1, 2019, and Sep 30, 2019.
alt
hc 6% 2019 Note: Rounding may lead to summation errors.
He
6%
od er
7% 2018
Go um
26%
s
ns
Fin
7% materials 2
Co
an
6%
sic
31%
cia
14
0%
B
l
7%
Utilities

13%
made at Germany-based
13%
13%
companies in 2019*
at least partially
satisfied. Number of board seats
gained by activist nominees
at Germany-based
ds
$1.8B
companies in 2019*.
%
oo
13 33%
g
25%
al
tri
dus Te
chn
In olog
y
Capital deployed into
Germany-based activist
campaigns by Elliott *Q1-Q3 2019
Management since
Sector breakdown of Germany-based companies publicly subjected to activist demands 2014.

23
“
LEGAL ANALYSIS
GERMANY
Matthias Horbach and Holger Hofmeister, Skadden.
2019 has thus far confirmed last year’s expectation that that it was considering share buybacks. Market rumors
shareholder activism in Germany would increase and become later suggested that there had been conversations between
more significant. This has held true despite an M&A market SAP’s management board and Elliott on how to increase the
that has been declining and despite (or perhaps due to) profitability of the company and to boost its share price over a
ongoing macroeconomic uncertainties (including Brexit and period of several months.
the U.S./China tariff controversy).
Activists also continue to participate in annual general
While activists continue to try to benefit in public takeover meetings, and corporations face contested shareholder votes
transactions, deal parties today know what to expect and on executive compensation and other management issues. At
prepare accordingly. For example, in the (aborted) public Bayer’s 2019 annual meeting, as a result of the liability issues
takeover of Scout24, the minimum acceptance threshold in the U.S. relating to the company’s Monsanto acquisition,
was lower than in comparable takeover offers, e.g. the shareholders rejected (by a narrow majority) the proposed
Stada transaction, and the strategic plans were formulated discharge of the members of the Bayer management board
cautiously. Activists were thus given lower leverage than in for 2018 — a symbolic but powerful message. Shortly after
earlier years. the general meeting, Elliott disclosed that it held a stake worth
$1.3 billion in Bayer.
Nonetheless, although financial investors made a public
takeover offer of 46 euros per share to the shareholders Specifically, in the context of corporate governance matters,
of Scout24 in order to gain control of the company and activists gain momentum with, and receive support from,
the Scout24 board recommended accepting the offer, the institutional investors. While many institutional investors have
minimum acceptance threshold was not reached and the traditionally acted rather passively, nowadays they increasingly
takeover failed. Meanwhile, activist investor Elliott Management involve themselves in corporate governance affairs to enhance
acquired a minority stake and gained a seat on the company’s performance and share value. A prominent example is the
supervisory board, and has put massive public pressure on support that Active Ownership Capital received from Deutsche
Scout24’s management ever since. In a published letter to the Bank’s DWS to replace the chairman and most of the
Scout24 management in early August 2019, Elliott proposed members of Stada’s supervisory board.
a separation of Scout24’s real estate classifieds business
from its automotive classifieds platform in order to improve The role of activists in Germany is expected to continue to
company performance. Since Elliott’s initial disclosure, the evolve, and their significance as drivers for M&A transactions
“
Scout24 share price has increased by 20% by the end of the and governance-related matters, in particular, will likely
third quarter. increase in the coming years.
In addition to their M&A-related activities, activists continue to

interact directly with the boards and individual board members “While many institutional
(usually the CEO, chief financial officer, or the chairman of
the supervisory board) of listed companies, irrespective of
investors have traditionally
a particular transaction, with a view toward exploring and acted rather passively,
unearthing other value drivers. Often, such interactions do nowadays they increasingly
involve themselves in corporate
not become publicly known. When Elliott disclosed that it
had bought a stake in SAP and publicly supported SAP’s
recently-announced comprehensive review and new financial governance affairs to enhance
targets, SAP applauded Elliott’s investment and announced
performance and share value.”
24
“
“Activists are increasingly reviewing
management compensation.”
An interview with Matthias Horbach and Holger Hofmeister.
Has private or public activist activity increased in Activists frequently claim that target companies have picked
the past year? unsuitable peer groups in order to make allegedly excessive
compensation practices more palatable to investors.
Activists are generally not transparent in their approach. Companies should thus be prepared to explain and defend
Accordingly, it is not possible to determine with certainty their peer group selection. Compensation committees can be
how often activists act behind the scenes. But in the used, and it is recommended that they be visible in corporate
past 12 months, they have increasingly acted openly and communications to convey transparency. However, the
done so effectively — often when implementing a strategy impression should be avoided that the supervisory board has
that had been planned beforehand and, in many cases, outsourced its responsibility for compensation decisions by
communicated in advance to the boards. Activists continue using such a committee.
to pursue opportunities for more significant involvement in
decision-making bodies behind the scenes. Have activists been deterred by the struggles of
some prominent German companies?
What corporate governance issues should
companies be most aware of? To the contrary. As long as the business models of the
affected companies are viable, struggles are often regarded
Companies should continue to pay attention to their level of as opportunities for change in which activists can engage
transparency and the contents of their communications in themselves.
order to not make themselves vulnerable. Activists often use
unclear decisions or the bases on which decisions are made Will deconglomeratization continue to be a theme
to craft their approach. for activists?
In addition, companies can make it more difficult to Conglomerates have a reputation for being inefficient due
replace entire boards, for example by establishing boards to a lack of focus on core competencies. Eliminating these
with staggered terms both at the supervisory and the inefficiencies by focusing on a limited number of activities
management levels. Further, they can draw up action plans should lead to better performance. Accordingly, we believe that
that prepare management for the entry of an activist. deconglomeratization will continue as an important strategic
goal of activists. Activists will normally not consider companies
Preparations of this kind will help ensure that communications that are significantly impacted by technological disruption, as
and exchanges take place deliberately and, to the extent they typically look for sound but undervalued entities.
“
possible, no precious time is lost.
Has executive remuneration become more

controversial? “As long as the business models
Activists are increasingly reviewing management of the affected companies are
compensation. They frequently argue that executive pay is viable, struggles are often
not aligned with total shareholder returns, and incentives
are not clearly identified. German legislative changes on
regarded as opportunities for
“say on pay” that are expected to come into force in early change”
2020 should result in more transparent management
compensation.

25
“
COUNTRY PROFILE
ITALY
Iuri Struta, Activist Insight.
A combination of structural and political factors may have More encouraging was the resolution of Elliott’s campaign
contributed to a dramatic drop in shareholder activism in to get a higher price for its shares in Ansaldo STS from
Italy this year. After peaking in 2016, activity has gradually acquiror Hitachi. Elliott was richly rewarded for its patience,
declined almost to a halt. Absent an abrupt change, 2019 though the campaign lingered for three years and included
will be the slowest year since 2013, when four companies bitter court fights before an agreement was finally reached
were publicly subjected to activist demands by the year’s in October 2018.
end.
Italy’s longstanding appeal – namely its cheap stocks and
Only two issuers were targeted in the first three quarters of protections for minority shareholders – could mean the
2019 – both reignitions of older corporate battles involving return of activists before too long. Amber founder Joseph
Vincent Bolloré’s Vivendi. Vivendi attempted unsuccessfully Oughourlian said Italy is “one of the most attractive markets
to wrest control of Telecom Italia’s board from Elliott in Europe,” with its financial sector particularly cheap.
Management, and stop Mediaset’s conversion into a Dutch With the political environment returning to normal (the new
holding trust, which might strengthen the power of its government has signaled a more friendly stance toward
largest shareholder, Silvio Berlusconi’s Fininvest (at the the European Union), the “activist wave might come back,”
time of writing, that campaign was moving to the courts). Albano believes.
The rise of a populist government led by the Northern In the meantime, institutional investors and corporate
League and Five Star Movement in 2018 and subsequent governance specialists are assessing the impact of changes
clashes with the European Commission over the country’s to how shareholders vote on executive remuneration.
budget has hurt investor sentiment. In addition, discussions Starting on June 10, companies are obliged to provide
to revise concessions for highways and utilities have made binding votes to shareholders on remuneration policy every
Italy less attractive to foreign investors, according to Arturo three years and annual non-binding votes on actual pay,
Albano, a corporate governance specialist at Amber Capital, similar to the U.K. “This is a big change,” Fabio Bianconi,
a $1.6 billion fund that has been active in Italy and Southern a corporate governance specialist at Morrow Sodali, told
Europe. Activist Insight. “More companies could get dissent at their
annual meetings and this can be a trigger for more complex
“
“Many listed companies [in Italy] show cheap valuations activist campaigns.”
but prices continue to be depressed because of the lack of
interest,” Albano told Activist Insight. Italy’s broad market
index, the FTSE MIB, has declined 11% since reaching a
multi-year peak in May 2018.
The difficulty in getting things done quickly and prevalence

“The difficulty in getting things
of anchor shareholders may have prompted investors to done quickly and prevalence
look elsewhere. “The level of complexity in Italy tends to of anchor shareholders may
have prompted investors to look
be high and our experience shows that regulators are not
always doing their job,” Marco Taricco, a partner at activist
advisory Bluebell Partners, which lists Jana Partners and elsewhere.”
Elliott as clients, told Activist Insight.
26
“
“Many listed companies show cheap
valuations but prices continue to be
depressed because of the lack of interest.”
ITALIAN TARGETS BY YEAR ITALIAN TARGETS BY MARKET CAP

13 Large
cap cap
no
11 Na 2019
2018
13% 13%
8 8
cap
Micro
6 13% LARGE CAP: > $10B

MID CAP: $2B - $10B
4 SMALL CAP: $250M - $2B
2 NANO CAP: < $50M
38%
Mid
%
2013 2014 2015 2016 2017 2018 2019
cap
25
Number of Italy-based companies publicly subjected to activist demands.
p
2019 data as of Sep 30. Projected 2019 full-year figure is 2.

ca
all 100%
Sm
ITALIAN TARGETS BY SECTOR

Market cap breakdown of Italy-based companies publicly subjected to activist demands
2019
2018
13%
17%
s
litie
Uti
25
1
%
re
13%
ca
Health
Technology
Services
50%

50%
made at Italy-based
companies in 2019*
13%
at least partially
satisfied.
s
ilasl Number of board seats gained

Basic mFiantaenrica by activist nominees at
38% Italy-based companies in
2019*.
$3.2B
Capital deployed into Italy-
based activist campaigns
*Q1-Q3 2019
by Vincent Bolloré since
Sector breakdown of Italy-based companies publicly subjected to activist demands 2014.

27
“
LEGAL ANALYSIS
ITALY
Lorenzo Corte, Skadden.
From 2016 to 2018, Italy registered more public activist to recede and appears to have become a permanent fixture
campaigns than several other European countries with of the market.
larger and more mature capital markets. Signs in 2019,
however, indicate lower activity than in the previous three Notwithstanding the individual campaigns of the year and
years. This may be associated with the political instability the evolution in corporate culture discussed above, it seems
that characterized a substantial portion of the first three likely that the story of 2019 is primarily one of increasing
quarters of 2019. Notwithstanding this period of uncertainty, uncertainty and investor restraint.
we believe that activist campaigns will continue to affect the
Italian market, particularly as prices continue to fall. Global factors are keenly felt in Italy, as they are elsewhere,
including the downside risks of Brexit and its effects on the
The ongoing campaign at Telecom Italia demonstrates how European economy, as well as the disruptions caused by
activists have become more comfortable operating in the tariffs in the context of global trade conflict. Domestic Italian
face of a traditionally resistant Italian corporate culture. In factors also contribute to uncertainty, particularly the political
2018, Elliott Management’s move to increase its stake in climate, which is currently characterized by high levels of
Telecom Italia sparked a reshuffling of the board. This year, instability and unpredictability. The makeup of the Italian
Telecom Italia’s largest shareholder, French conglomerate government, as well as the regulatory and macroeconomic
Vivendi, attempted to obtain additional board seats until policies of any future Italian government, remain difficult to
Italian state lender CDP interceded. CDP was able to broker forecast, weighing on investor confidence.
a truce and Vivendi ultimately dropped its demand for a
higher number of board seats, indicating the Italian state’s In the face of this unpredictability, the performance of the
pivotal role in corporate matters. The activist campaign itself Italian economy has continued to be subdued, with lackluster
demonstrates the continued interest of foreign investors overall economic growth predicted to continue through
in the Italian market, particularly in established Italian 2019 and into 2020. Barring the resolution or moderation of
companies. these restraining forces, activist activity may remain muted
in the short term as actors await clarity in the direction of the
Apart from the lessons of individual campaigns, the influence market and political environment.
of activist investors also served to increase the pace of
corporate governance reforms at Italian companies. As with
their European and global peers, Italian institutions have felt
“
ongoing pressure to increase accountability, transparency,
and communication in governance practices, resulting in
increased leverage for minority shareholders. The increasing
ownership of publicly listed shares by foreign investors, in
conjunction with the reduced stakes held by traditional Italian “Barring the resolution or
shareholders, is likely to sustain this rebalancing of corporate moderation of these restraining
control and fuel activism.
forces, activist activity may
Diverging performance of economies both within and outside remain muted in the short term
Europe is likely to continue to generate investor interest in
vulnerable Italian targets. Even with low economic growth,
as actors await clarity in the
given the range of entities targeted by foreign funds over the direction of the market and
last few years, the role of activism in Italian markets is unlikely political environment.”
28
“
“As with their European and global peers,
Italian institutions have felt ongoing
pressure to increase accountability,
transparency, and communication in
governance practices.”
An interview with Lorenzo Corte.
Has private or public activist activity increased in the It is likely that concerns surrounding remedies for activist short
past year? sellers will be addressed, if at all, primarily through the prism
of government regulation, targeting the speed, extent, and
Consistency, rather than growth, characterized activism in transparency of short selling practices, rather than reforming
the Italian market over the past year, sustaining rather than private tools. Nevertheless, there appear to be no reliable
amplifying the pattern of private and public activism that has indications that such policy reform is likely to occur in the
been apparent for several years. Following the resumption foreseeable future.
of international investment campaigns in the post-recession
recovery period, the Italian market of the early and mid-2010s What corporate governance issues should companies
generated fertile ground for investors, and those international be most aware of?
investors have become an entrenched reality in the Italian
system over the last decade. Corporate governance in Italy continues to evolve, particularly
in light of new market pressures on domestic companies.
However, as market conditions and political certainty Among others, two prominent issues that have come to the
deteriorated in 2019, investor enthusiasm has dampened. fore in the Italian context are the need to proactively address
The erosion of the traditional aversion to hostile takeovers in gender diversity in listed entities, and to implement robust
the Italian market, in which high concentration of ownership cybersecurity preventative and response policies. Pressure
continues to sustain a general suspicion of investor activism, to conform with public and investor perceptions of a diverse
will provide investors with opportunities in Italy. However, the workforce, as well as to secure sensitive personal or industry
overall economic and political context of Italy has generated a information, means these preexisting governance issues
cautious 2019 for activists. have become even more central to companies’ governance.
Additionally, in light of increasing foreign ownership, the
emphasis placed on diversity and cybersecurity in investor
Do companies have adequate remedies against countries will reinforce domestic Italian pressure to address
activist short sellers? these concerns.
Short sellers have received increasing attention in Italy this Will the state continue to play a role in important
year, particularly in the context of Italian financial institutions. industries, and is the political climate conducive to
The market perception of financial institutions is strongly activism in Italy currently?
influenced by the performance of the Italian government bonds
they hold, as well as the forecast EU and Italian budgetary The Italian state has historically played a significant
policies that have proven politically contentious. Political role in strategic sectors of the Italian economy, such as
uncertainty has contributed to the short selling of financial telecommunications, energy, and defense.
institutions as Italian national finances have taken on increased
media prominence. Based on the recent rhetoric by leading Italian politicians,
there is little indication that change to the traditional state
While the previous Italian government mooted the possibility of involvement in industries such as telecommunications, energy,
regulatory controls on short selling to blunt their distortionary and defense is on the immediate horizon. While any reform in
effects on securities trading, no such changes have been this sphere will be closely watched by investors as potentially
forthcoming, and companies are left with few private devices generating new investment opportunities, the primary focus of
to temper the impact of short sellers. activists will continue to be on the fundamentals of the Italian
economy.

29
“
COUNTRY PROFILE
SWITZERLAND
The level of activism at Switzerland-headquartered The activist faced a formidable hurdle, however, in 42.6%
companies has trended down slightly since 2016’s peak, shareholder The Ernst Göhner Foundation (EGF). While other
with six companies targeted in the first nine months of 2019, shareholders were subjected to a 5% voting cap, EGF had
according to Activist Insight Online, compared to 11 in the been voting its full stake. When Danish rival DSV made a
same period three years ago. For the first time since 2014, bid for Panalpina, Cevian cleverly cornered the legal market
no companies with a market capitalization of more than $10 by commissioning multiple studies of the grandfathering
billion received a public demand from an activist. of EGF’s voting power, which concluded that the original
decision to exempt the foundation had been wrong. Cevian
Part of the reason may lie in the fact that the SMI Expanded also hired a proxy solicitor for a shareholder vote on the cap,
index, which covers 50 Swiss companies, has performed the first time it had participated in a solicitation.
better than comparable indices around Europe over the past
12 months, thanks to a softer fourth quarter in 2018. Panalpina and DSV reached a deal days before the April
4 special meeting, following recommendations from both
And while the financial sector, in the form of troubled GAM Institutional Shareholder Services (ISS) and Glass Lewis in
Holding, and industrials, with Panalpina World Transport, favor of the cap. Like its U.S. peer ValueAct Capital Partners
were again front and center, 2019 saw a rare brace of at U.K. theme park owner Merlin Entertainments, Cevian’s
campaigns at tech firms. Swiss activist Veraison Capital won public support for an industry merger was a rare event, and
its first proxy contest, joining the board of Comet Holding. It a sign that activists may be getting more explicit in European
had previously lost one contest, at Komax Holding in 2016, campaigns in the pursuit of profit.
and settled with two other companies.
Meanwhile, Third Point Partners eased the pressure on Nestlé
Meanwhile, Sunrise Communications Group’s proposed in the third year of its campaign, expressing confidence in
acquisition of cable operator UPC set off a chain reaction management as a turnaround gathered pace. The consumer
through interventions by 24.5% shareholder Freenet and then products giant has been reviewing asset sales at an increased
Luxembourg-based funds Active Ownership Capital (AOC) pace and its stock had risen 36% by the end of the third
and Axxion. Coinciding with a wave of anti-M&A activism on quarter, allowing it to shrug off grumbling from the wider
both sides of the Atlantic, Freenet wants a rethink, while AOC shareholder base about the role of Chairman Paul Bulcke, who
“
is also opposing the acquisition and Axxion wants to remove was previously CEO.
Chairman Peter Kurer and director Jesper Ovesen. Even a
sweetening of the deal and a greater shouldering of the risks
by seller Liberty Global in mid-October failed to satisfy the
dissidents, who consider the financing required to complete it
too expensive. “Cevian’s public support for
an industry merger was a rare
Perhaps the most interesting of recent campaigns though,
was Cevian Capital’s at Panalpina. Cevian, which operates event, and a sign that activists
across Northern Europe but has its origins in Sweden, may be getting more explicit
had been working on an operational thesis at the shipping
company and calls for a new chairman had earned the
in European campaigns in the
backing of Artisan Partners and Franklin Templeton. pursuit of profit.”
30
“
“2019 saw a rare brace of
campaigns at tech firms.”
SWISS TARGETS BY YEAR SWISS TARGETS BY MARKET CAP

11
10 cap
icro 2019 La
M
9 9 9 rg
2018
ec
14%
ap
7
6
33%
29
%
LARGE CAP: > $10B
Mid cap
4 MID CAP: $2B - $10B
NANO CAP: < $50M
%
2013 2014 2015 2016 2017 2018 2019

67
57%
ap
Number of Switzerland-based companies publicly subjected to activist demands.

lc
2019 data as of Sep 30. Figure in red box is a 2019 full-year projection.
al
Sm
SWISS TARGETS BY SECTOR

Market cap breakdown of Switzerland-based companies publicly subjected to activist
es
demands between Jan 1, 2018, and Sep 30, 2018, and Jan 1, 2019, and Sep 30, 2019.
r vic 2019 Note: Rounding may lead to summation errors.

Se
17% 2018
In
14%
du
44%
str
ods
ial
go
33
Consu 9%
goo
1
%
r
2
me
ds
14%
Financial

17%
made at Switzerland-based
companies in 2019*
at least partially
s
14%
al
i satisfied. Number of board seats

ter
Basic ma gained by activist nominees
29% at Switzerland-based
companies in 2019*.
$3.4B
33%
Technology
Capital deployed into

Switzerland-based activist
*Q1-Q3 2019
campaigns by Third Point
Sector breakdown of Switzerland-based companies publicly subjected to activist demands Partners since 2014.

31
“
LEGAL ANALYSIS
SWITZERLAND
Mariel Hoch and Fabienne Perlini-Frehner, Bär & Karrer.
The primary sources of laws and regulations relating to Shareholders may not act by written consent in lieu of a
shareholder activism are the Swiss Code of Obligations (CO), meeting, but they can be represented by issuing written voting
governing the rights and obligations of companies’ boards of instructions to either the independent proxy or (depending
directors and shareholders in general, and the Swiss Financial on the articles of association) to another shareholder or a
Market Infrastructure Act (FMIA), enacted on January 1, 2016, third party, including advisory firms. Prominent Swiss proxy
containing additional rules for listed companies and their advisers, such as Ethos, SWIPRA, and zRating, publish
shareholders. general proxy voting guidelines, corporate governance
principles, and company-specific voting recommendations.
The provisions of the FMIA are set out in more detail in If advisory firms do not receive specific voting instructions,
two ordinances, the Swiss Financial Market Infrastructure such firms will generally exercise votes obtained according to
Ordinance (FMIO) and the Swiss Financial Market the respective voting recommendation. Also, proxy guidelines
Infrastructure Ordinance by FINMA (FMIO-FINMA). issued by internationally known proxy advisers such as
Further, the Ordinance against Excessive Compensation Institutional Shareholder Services (ISS) or Glass Lewis have
in Listed Companies (OAEC) contains specific rules on the developed considerable influence on the voting behavior at
compensation of management and boards of directors. The Swiss-listed companies’ shareholder meetings.
Takeover Ordinance (TOO) sets out detailed rules on public
takeover offers including boards’ and qualified shareholders’ According to the OAEC enacted on January 1, 2014, Swiss
obligations. Companies listed on the SIX Swiss Exchange pension funds are obliged to exercise their voting rights
are also bound by, inter alia, the Listing Rules (LR-SIX), the related to their participation in listed companies with respect
Directive on Ad hoc Publicity (DAH), and the Directive on to certain agenda items (e.g. election of the board of directors
Information relating to Corporate Governance (DCG). and its chairman as well as the total compensation of directors
and management). Since the exercise of the voting rights
Compliance with the CO and the OAEC is primarily enforced must happen in the best interest of the insured persons (and
by the civil courts. FINMA enforces the FMIA and its such interest is deemed preserved if the voting behavior is in
ordinances, and the Takeover Board enforces the TOO and the furtherance of the continuing prosperity of the pension fund),
takeover-related provisions of FMIO-FINMA. Compliance with pension funds tend to rely on the recommendations of the
the LR-SIX, DAH, and DCG is enforced by the SIX Exchange aforementioned proxy advisers both for efficiency and potential
Regulation. liability reasons.
According to the CO, any shareholder representing 10% of the The law on stock companies, which forms part of the CO, is
share capital or, according to the predominant legal doctrine, currently under review. Several changes have been proposed
representing shares of a par value of at least 1 million Swiss that could promote shareholder activism, most importantly
francs, has the right to call an extraordinary shareholders’ lower thresholds with regard to listed companies for (i) calling
meeting. Certain companies have introduced lower thresholds an extraordinary shareholders’ meeting (representation of 5%
in their articles of association. The required threshold may also of the share capital or the voting rights instead of 10%), (ii)
be reached by several shareholders acting in concert. The requesting that a special audit be carried out (representation of
request to call an extraordinary shareholders’ meeting must be 3% of the share capital or voting rights instead of 10%), and (iii)
submitted in writing to the company’s board and must contain requesting that an item be put on the agenda (representation
the requested agenda items including the activist’s motions of 0.5% of the share capital or voting rights instead of 10% or
thereto. shares with a nominal value of at least 1 million Swiss francs).
The changes are not yet final and will come into force in
January 2021 at the earliest.
32
“
“A common request by activists in recent
months has been the divestiture of non-
core businesses.”
An interview with Mariel Hoch and Fabienne Perlini-Frehner.
Has private or public activist activity increased in What defense strategies have been learned from
the past year? recent campaigns?
There has been a trend toward increased shareholder activism Many companies have implemented defensive measures, in
in the past year, with Swiss activist investor Veraison Capital particular defensive provisions in the articles of association,
being particularly present in recent months (targeting, e.g. such as transfer restrictions, voting rights restrictions (3%
Implenia, Ascom Holding, and Comet Holding). and 5% are the most common thresholds), super voting
shares (i.e., shares with a nominal value reduced by up
What corporate governance issues should to 10 times by keeping the one-share, one-vote principle,
companies be most aware of? normally assigned to an anchor shareholder), and super
majorities relating to specific resolutions or to a quorum at
Shareholder activism in Switzerland primarily focuses on the shareholders’ meeting.
board representation and executive compensation. Activist
shareholders usually seek representation – either new In addition, if an activist shareholder requests that certain
or enhanced – on the board of directors in order to drive agenda items are tabled for a shareholders’ meeting, the
their strategic agenda. It is estimated that in Switzerland, board of directors can, to a certain extent, influence the
activists use board representation as a tactic more than decision-making process, i.e., by determining the order
anywhere else in Europe. in which the agenda items are dealt with, rephrasing the
requested agenda item, or adding motions to a requested
A common request by activists in recent months has been agenda item.
the divestiture of non-core businesses. By way of contrast,
environmental, social, or governance (ESG) activism is rarely Do companies have adequate remedies against
tabled in activist campaigns. However, there are certain activist short sellers?
indications that sociopolitical matters, such as board
gender diversity or the disclosure of political spending Other than the duty to disclose short selling positions in the
and lobbying, could play a role with regard to governance instances they exceed 3% of the company’s voting rights,
activism in the future. there are no effective legal remedies against short selling in
place.
“
Is executive remuneration a source of conflict in
Switzerland?
The implementation of the Ordinance against Excessive

Compensation in Listed Companies (OAEC) has led to
increased attention in executive compensation. Shareholders Activist shareholders usually
have a binding vote on the executive compensation of a seek representation – either
Swiss company’s executive management – one of the most
powerful tools to direct management’s conduct. It is worth new or enhanced – on the
noting, however, that it is rare that shareholders reject the board of directors in order to
compensation submitted to them by the board of directors. A
negative vote does, however, occur occasionally in relation to
drive their strategic agenda.”
a consultative (non-binding) vote on the compensation report.

33
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ACTIVIST INVESTING

François Barrière Lorenzo Corte Armand Grumberg

Holger Hofmeister Scott Hopkins Matthias Horbach

06 COUNTRY PROFILE: UNITED KINGDOM Elana Duré, Activist Insight.

08 LEGAL ANALYSIS: UNITED KINGDOM Scott Hopkins, Skadden.

10 ESG ACTIVISM: A NEW PARADIGM Cas Sydorowitz, Georgeson.

12 COUNTRY PROFILE: FRANCE Eleanor O’Donnell, Activist Insight.

14 LEGAL ANALYSIS: FRANCE Armand Grumberg and François Barrière, Skadden.

16 GOING LOCAL Andrew Honnor, Greenbrook Communications.

18 IN NUMBERS: ACTIVISM IN EUROPE Activist Insight data.

20 A SYSTEMATIC SHIFT Muir Paterson, Citigroup.

22 COUNTRY PROFILE: GERMANY Josh Black, Activist Insight.

24 LEGAL ANALYSIS: GERMANY Matthias Horbach and Holger Hofmeister, Skadden.

26 COUNTRY PROFILE: ITALY Iuri Struta, Activist Insight.

28 LEGAL ANALYSIS: ITALY Lorenzo Corte, Skadden.

30 COUNTRY PROFILE: SWITZERLAND Josh Black, Activist Insight.

ACTIVIST INVESTING IN EUROPE 2019 | www.activistinsight.com | www.skadden.com

Josh Black, Activist Insight.

At first glance, activist investing looks to have taken a No deal

While some trends may plausibly extend into 2020, much 89

In France, the picture is murkier thanks to strong government

antipathy to activism. That will undoubtedly encourage

companies to employ stiffer defenses in some cases,

although it is notable that Pernod Ricard has not. In any

case, established players such as CIAM and Amber Capital

will likely ensure that there is at least some presence in years

to repeat their incursions once they establish the lie of the %

ACTIVIST INVESTING IN EUROPE 2019 | www.activistinsight.com | www.skadden.com

Elana Duré, Activist Insight.

U.K. targets by year U.K. targets by market cap

2013 2014 2015 2016 2017 2018 2019 34

public activist demands

satisfied. Number of board seats gained

ACTIVIST INVESTING IN EUROPE 2019 | www.activistinsight.com | www.skadden.com

Scott Hopkins, Skadden.

An interview with Scott Hopkins.

Remuneration and environmental, social, and governance

ACTIVIST INVESTING IN EUROPE 2019 | www.activistinsight.com | www.skadden.com

corporate governance stakeholders. Learn more at georgeson.com

Eleanor O’Donnell, Activist Insight.

FRENCH TARGETS BY YEAR FRENCH TARGETS BY MARKET CAP

2 NANO CAP: < $50M

public activist demands

ACTIVIST INVESTING IN EUROPE 2019 | www.activistinsight.com | www.skadden.com

Armand Grumberg and François Barrière, Skadden.

An interview with Armand Grumberg and François Barrière.

ACTIVIST INVESTING IN EUROPE 2019 | www.activistinsight.com | www.skadden.com

The attitude of traditional long-only investors continues to “North American

of activist situations worldwide

CLICK HERE TO VIEW 2020 SPONSORSHIP

EUROPEAN TARGETS BY MARKET CAP KEY 2019 CAMPAIGNS

SMALL CAP: $250M - $2B GERMANY

MICRO CAP: $50M - $250M

18 ACTIVIST INVESTING IN EUROPE 2019 | www.activistinsight.com | www.skadden.com

Citigroup | Shareholder Advisory Group

Defence Sellside + Defence Defence

Josh Black, Activist Insight.

GERMAN TARGETS BY YEAR GERMAN TARGETS BY MARKET CAP

2013 2014 2015 2016 2017 2018 2019 % 13