State of the Market – European Review Q1 2024
Activism and Shareholders Engagement
#12
Campaigns Q1 2024
The most targeted sector was Health Care ...
25%
17%
8%
Health Care
Technology
Energy
Materials
Consumer Staples
Communications
Others
As of March 2024, number of Activism Campaigns in Europe is #12:
Summary
The activism wave shows a slow down in the first quarter of the year, with only 12 campaigns in the European markets.
Requests for board renewal recorded the largest Q1 activism activity not only with regard to the number of campaigns but also in terms of visibility.
UK and Germany continue to attract the majority of the pie in the European activism across the various sectors.
As of March 2024, number of Activism Campaigns in Europe is #12: Number of public campaigns slowed down in the first quarter of 2024, with activists possibly holding their pens while enjoying the strong market performance (EuroStoxx50 up ca. 12% YTD).
Q3
Q4
Q2
Q1
24
43
74
82
101
98
110
87
2015
2016
2017
2018
2019
2020
2021
2022
2023
117
6
11
20
13
25
29
32
22
-63%
Not only occasional activists also, more traditional asset managers are initiating activism campaigns using a new internal perspective.
Case Study
Client Solutions is a division of UniCredit Group and consists of UniCredit S.p.A., UniCredit Bank GmbH, UniCredit Bank GmbH London Branch, UniCredit Bank GmbH Milan Branch and other members of UniCredit Group. UniCredit Group and its subsidiaries are subject to regulation by the European Central Bank. UniCredit S.p.A. is regulated by Banca d’Italia and supervised by the Commissione Nazionale per le Società e la Borsa (CONSOB). In addition, UniCredit Bank GmbH is regulated by the Federal Financial Supervisory Authority (BaFin), UniCredit Bank GmbH London Branch is authorised and regulated by the Financial Conduct Authority (FCA), and UniCredit Bank GmbH Milan Branch is also regulated by Banca d’Italia and supervised by the Commissione Nazionale per le Società e la Borsa (CONSOB). This publication is intended for marketing purpose only and it is published by UniCredit Group. Under no circumstances may the information contained in the published material be construed as an offer, recommendation, invitation to offer or promotional message for the purchase, sale or subscription of financial products. This marketing communication is directed solely at investment professionals and constitutes a “non-retail communication” for the purposes of the relevant rules.
2024 Q1 Update
CASE Study
A&SE Services
Legal Framework Episode #5
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Accessibility
... but there was no place to hide as activists attacked all sectors!
The trend keeps going
Hover over the image to see more information.
This quarter again, the activism campaigns launched in Europe were mainly led by occasional and first-time activists (83%). That percentage in 2018, 5 years ago, was way lower and equal to 59%.
... while activists are increasing their requests of return capitals and buybacks, the main slates remain board control and representation. This is probably related to the upcoming AGM season.
Learn more
42%
Board Representation / Control
Germany
2024
12
Break up
33%
Buyback
Oppose Acquisition
Environmental
While the targeted large companies continue to be the most visible, companies with a market capitalisation of less than EUR 1 billion continue to account for around 50% of total EU campaigns.
> EUR 10 bn
EUR 5 bn – EUR 10 bn
0%
EUR 1 bn – EUR 5 bn
EUR 500 m – EUR 1 bn
< EUR 500 m
% 2024 Q1 EU CAMPAIGNS BY MARKET CAP
2023 Q4 Update
Legal Framework Episode #4
Case Study Criteo
ESG and Shareholder Base
Business Operation
Return and Valuation
Vulnerability Index is 35.7 – quite low compared with industry and country average, meaning the company is not a clear target for activists; Total Shareholder Return and business operations should be monitored as a deterioration could increase dissatisfaction among shareholders; Corporate governance does not fully meet the best standards as institutional investors are heavily represented in the small free float.
Our Proprietary Model – Vulnerability Index
The Result
The Activist
The Request
The Case
On 22 February 2024, the activist investor Petrus Advisers sent a letter to the Chair and the CEO of Criteo stating its 5.5% ownership of the company, asking for changes and clarifications.
The Catalyst
In this case the catalyst is the Google’s phasing out of third-party cookies. On 7 February 2024, Google announced it was ending third-party cookies in 2024 for all Chrome users to appease their concerns on the use of personal data and their perception of cookies as a privacy-invading technology. Hence Criteo, which provides personalised ads to individuals based on the tracking of their online behaviour through cookies, was attacked by the activist Petrus that hinted at the uncertainty of the company’s future value.
Petrus Advisers is a UK-based investment firm and one of the largest activists funds in the world. The company was founded in 1970, and in 2009 it turned into an activist. Petrus Advisers is mainly focused on European countries where they can invest like “locals” and industries within which they are experts. The fund is known for its aggressive approach and for being focused on developing a deep, fundamental understanding of the public companies it invests in, paired with active engagement both publicly and behind the scenes.
Criteo was able to promptly defend itself by replying, the day after the attack, with a strong and well-constructed letter. The Company not only highlighted its commitment to the creation of shareholder value and described in detail its recent performance and strategy, but it also stressed the Board and Management team’s willingness to maintain a regular dialogue with all its shareholders and value constructive input. Criteo also declared it was carefully reviewing Petrus’ letter and since then the campaign was silent. More to come?
Results as of today
Petrus mainly requested Criteo: to prepare an investor day during which they should communicate the recent business model transformation and the actual corporate structure of Criteo which has the HQ in Paris and the listing in US, on Nasdaq (view our previous report about listing choices); to accelerate the existing share buyback program; to initiate a comprehensive strategic review evaluating all ownership options and to refresh the Board of Directors by adding some independent candidates proposed by Petrus.
35
Vulnerability Index
Click on each circle for more information.
.7
The full range of our offer
More than 30 activities provided by UniCredit Team to secure and protect the Company from activist potential attacks and proactively engage with shareholders ...
Vulnerability Assessment
Shareholder Support Analysis
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Explore Penetration Angles
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Communication Strategy
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Statement of Defense
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Activists Matrix
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By failing to prepare, you are preparing to fail.
Michele Troiani
Managing Director Head of Activism & Shareholder Engagement Advisory & Financing Solutions
Michele.Troiani@unicredit.eu
Marta Rinero
Activism & Shareholder Engagement Advisory & Financing Solutions
MRINERO.external@unicredit.eu
Contacts
Quantitative tools to identify vulnerabilities
In-depth financial, operational and organizational analysis
Fairness valuations & Break up analysis
Industry specific Alternatives
Activists’ Flow analysis and track-record
Capital Structure & Strategic Opportunities definition
Corporate Governance Review
Habemus DDL Capitali, what’s next?
Governments across Europe are working to make the financial markets more competitive. In Italy, there’s more to come: the TUF legislation is the next in line to move forward with radical changes. Works have started already and are expected to be completed in 2025.
Of the companies that have relocated their headquarters to the Netherlands, the vast majority (20 out of 22) are Italian. Sooner or later, the legislator had to act, and this law is a start. It is also widely commented that the other European markets (namely France and Germany) will soon follow suit, and it remains to be seen.
What's next
We observe that ...
Changes to the main market
DDL Capitali – The law, meant to simplify access to the capital and to compete with global markets.
The DDL capitali main news are:
SME
5
Rappresentante Designato
4
Voto plurimo
3
Voto maggiorato
2
Minority list
1
Board list
As of today, those shareholders that have recorded their shares into the Special register see their votes doubled after 24 months owning. The changes will allow those votes to continue increasing year by year (progressive step-up).
The management is meant to propose a list to be voted by the AGM to renew the board. List needs to be 33% longer than the number of members to be elected (i.e.: 10 seats to be allocated, list needs to be 13 at least). For the list to be presented, the quorum needs to be 2/3 (of the outgoing board) and the deadline is 40 days before the AGM date.
It will receive a number of seats that is closer to the number of votes it receives. (i.e. if the second list receives 40 % of the votes, it will get about 40 % of the seats). This is the most drastic change, which has been strongly criticised as it harbours the risk of minorities gaining too much power. We see this as an improvement on the status quo and an exercise in making corporate governance less dependent on one side, as is often the case, and creating more balance between the wider shareholder base.
Those that are going to IPO can decide whether the votes of long term shareholders are higher than others, up to 10x.
Companies may decide to hold general meetings only in the presence of a shareholder representative instead of opening them to the entire shareholder body (only if the articles of association permit this).
The market capitalisation threshold of EUR 500 million will be raised to EUR 1 billion, so that the simplifications will be extended to more companies going public. In addition, the disclosure of a stake of ≥3% to Consob will be increased to 5%.
