The Swiss financial industry experienced a remarkable resurgence of shareholder activism in 2023. The custodians of impeccable corporate governance are currently on the rise worldwide and the diversity of activists is increasing.
In the Swiss financial sector, 2023 was a remarkable year for activist investors in many ways. One notable example is the Newgame and Bruellan investor grouping, which made headlines for weeks in the bidding war for Swiss fund manager GAM.
The «rebels» ultimately prevailed in their demands against the GAM board of directors and the British asset manager Liontrust.
Prior to that, Petrus Advisers caused significant commotion and personnel shake-ups at Temenos, the banking software manufacturer based in Geneva. Among its achievements, the British company forced the exit of CEO Max Chuard.
Butcher of Stockholm
Shareholder activists have also made their presence felt at Swiss bank giant UBS, although they have been rather reserved thus far. Just a few weeks ago, Cevian Capital became a major shareholder in UBS. The activist, who prefers to operate in the background, sees significant potential for the UBS stock, as co-founder Lars Foerberg highlighted in December.
The Swedish investment company has previously exerted powerful pressure in Switzerland as an activist investor, including at electrical engineering company ABB and logistics firm Panalpina, where it played the role of the assertive shareholder. Not for nothing is the company sometimes referred to as the «Butcher of Stockholm» due to its previous demands for «dismantling and gutting.»
But Cevian is unlikely to pursue the same radical tactics at UBS.
Good Nose
Months before Cevian, renowned star investor Daniel Loeb took a stake in UBS with his U.S. hedge fund Third Point, as reported by finews.ch. «We believe UBS’ acquisition of Credit Suisse is a transformative transaction, with a price and terms that are very much compelling,» the well-known billionaire wrote in a letter to investors. Third Point is one of the largest hedge funds in the U.S.
Loeb’s assessment proved apt, as the UBS stock is trading much higher today than it was a year ago. In his latest investor letter for the third quarter of 2023, released in mid-November, the controversial hedge fund manager hailed UBS shares as one of his biggest winners of the quarter.
Worldwide Wave of Activism
The influence of activist shareholders is on the rise, not just in Switzerland but around the globe. Although the attack by U.S. investment firm Hindenburg on the Indian Adani Group grabbed the most headlines last year, scores of other activist campaigns have shaken up company boardrooms, from British banking behemoth HSBC, where activist Ken Lui called for its breakup, to oil heavyweight BP, where climate activists submitted a resolution calling on the company to set stricter emission targets.
The surge in campaigns that began in the U.S. with the era of «corporate raiders» has now reached Europe and Asia. Investors are increasingly coming into conflict with company management they consider below par, as they chase high financial returns and strategic responsibility.
Attacks Reach New Records
The guardians of impeccable corporate governance launched a record number of attacks in 2023. More and more dissatisfied shareholders are trying to topple top managers in the executive suites or force the sale of companies whose stock prices have stagnated. According to a study by investment firm Lazard, there were 252 new campaigns worldwide, an increase of 7 percent on the previous year, as reported by the «Financial Times» (paid article).
Data from the U.S. analysis firm S&P Capital IQ also pointed to a record increase in investor activity in 2023, with 961 registered campaigns worldwide.
New Generation of Activists
One interesting trend is the increasing diversity of activists which are no longer exclusively the preserve of hedge funds like Third Point. More than 40 percent of the activists who launched campaigns last year were active in this role for the first time, according to Lazard.
In general, activists in 2023 focused primarily on the technology, media, and telecommunications (TMT) sectors, as well as financial institutions, in the trendsetter market of the U.S. As regards financial institutions, the regional banking crisis at the start of the year presented opportunities for activists or strengthened their negotiating position in existing investments.
Financial Sector Increasingly in Focus
According to data from FTI Consulting, the financial sector was targeted nine times in the third quarter of 2023. At least 16 campaigns were initiated in the year-end quarter, adding to the 53 campaigns in the first half of the year.
Data from S&P also highlights a significant rise in campaign activity in the financial sector. This is not only due to the banks’ liquidity shortages in spring 2023, but also because shareholders are calling for greater disclosure from banks on transition plans to see how their financing activities will be aligned with emissions reduction targets or the Paris climate targets.
Size Alone Is No Protection
S&P has identified another intriguing trend: the rise of activist campaigns taking aim at major corporations. This increase at large companies suggests that size alone will not be an effective enough defense tactic against well-funded and well-thought-out activist campaigns.
The current year is expected to bring a similar level of conflict in boardrooms, if not more. Campaigns by activist investors who acquire minority stakes in companies to drive strategic change have been on the rise year after year since around 2017.
Julius Baer the Next Target?
In the Swiss financial sector, things are expected to calm down this year, as activists have already gotten their way with obvious problem children like Temenos and GAM. Julius Baer, the private bank based in Zurich, could potentially come under the scrutiny of activist investors following the debacle surrounding the bankruptcy of real estate group Signa and subsequent decline in the share price. But there have been no signs of that yet.
