UK Activist Targets Outperform Despite Covid-19

Article by Alvarez & Marsal

Corporates in the U.K. targeted by activist funds outperformed the market and global peers before and during the pandemic

Alvarez & Marsal (A&M) reveals its analysis of share price performance of activist targets in the U.K., Europe (excluding U.K.), and U.S.

The study looks at the share price performance of 245 corporates following their public targeting by activist funds. A&M looked at activist campaigns started between 1 January 2017 and 28 February 2020 and compared the share price performance of the targeted companies to market indices (S&P 500 and STOXX Europe 600).

The impact of COVID-19

  • The analysis shows that the share price of corporates in the U.K. that had been targeted by activist funds outperformed the market during the COVID-19 pandemic* compared to flat or negative performance among European and U.S. counterparts. 
  • The average targeted U.K. corporate’s share price outperformed the market over this COVID-19 period by 1.5%.
  • This compares to flat performance of 0.1% in Europe over this period, and significant underperformance of -5.8% in the U.S.

Two-year trends

  • In line with performance during the pandemic, the research also shows that U.K. companies targeted by activist campaigns have outperformed the market and also similarly targeted European and U.S. corporates in the 24 months since their campaigns began.
  • Corporates in the U.K. outperformed market indices by 3.6% in two years, compared to 2.7% outperformance among U.S. companies.
  • In Europe, activist targets saw their share prices underperform by -3.3% in the same two-year period following the activist campaign.
  • U.K. campaigns largely matched market performance over the first year from the activist campaign being launched (with flat performance of 0.3%), whereas U.S. campaigns underperformed the market by -4.3% and Europeans by -8.0% over the same timeframe. 
  • A likely driving factor for this trend is that U.S. campaigns are typically significantly more hostile over a longer period than in the U.K. This can lead to less focused management and greater uncertainty for other investors, which can undermine the share performance. Nevertheless, the performance of U.S. targets markedly increased in the second year as campaigns came to fruition and rewards began to be reaped.  The U.S. and U.K. performance also shows that, on aggregate, Activists are correctly identifying opportunity for improvement and adding value.
  • The challenges to successfully navigating an activist campaign in continental Europe are reflected in the European underperformance. Local understanding is key.  Whilst there is a steadily growing acceptance of activist funds as potential constructive forces for good across Europe, negative corporate, market and public sentiment still prevails. The underperformance of share prices that are associated with activist campaigns will only exacerbate that negative sentiment.

Malcolm McKenzie, Managing Director at A&M, commented

“The diverging performance of activist targets across the regions underlines that activists are playing by different national rules. The more collaborative approach U.K. focused activists typically take with boards can leave corporates better equipped to react quickly to external shocks, such as COVID.

“In contrast, the generally more hostile nature of U.S. campaigns has taken its toll on share performance amid COVID, distracting management desperately trying to navigate the COVID disruptions . 

“This is true of activist campaigns in normal times, too. Taking into account the more combative context for targets in the U.S., and the less established activist market in Europe, it takes longer for activists in these regions to see progress, while U.K. companies outperform across the board, and do so earlier.”

Transformation-led campaigns prove most successful

  • Campaigns that include a Transformation element, where activists seek to promote strategic or operational change, are associated with the best results, with an outperformance over two years of 3.4%. Such Transformation campaigns were also associated with heightened performance during COVID-19, where performance remained flat (versus the other campaign types entering negative territory).
  • Activist campaigns including an M&A component also had a positive impact on target share price, which outperformed the market by 2.8% over the two-year period, although slumped significantly to -2.9% in the six months during COVID-19. This is in part due to the slowdown in merger activity during the pandemic, and the subsequent failure to deliver the share price increases that had been assumed by the market.
  • By contrast, campaigns focussing on Governance demands were comparatively disappointing with an average underperformance of -6.7% after one year. However, this did improve significantly during the second year, with an average outperformance of 4.7%, leading to a two-year underperformance of 2.0%.
  • This marked ‘hockey stick’ performance may reflect the initial challenges and time required for new Board members to develop their plans of action, before delivering rewards in the second year. 
  • The underperformance of Governance campaigns in the first year is a key driver of the underperformance of campaigns in U.S. and Europe over the same timeframe. Overall, 74% of European campaigns and 70% of U.S. campaigns against corporates included a demand for Governance changes, whereas just 41% of U.K. campaigns did the same.

Malcolm McKenzie, Managing Director at A&M, commented: “A key factor behind the outperformance of Transformation campaigns comes from the disruption in the corporate landscape accelerated by this pandemic.

“Corporates with an existing transformation mindset, catalysed by an activist campaign, have been in a better position to react to COVID-19 induced business changes, than if the activist-driven focus was towards M&A or Governance.”


* Share price measured between 28 February to 31 August 2020


A&M analysed the share price performance of 245 corporates across Europe and the U.S. (105 in U.S., 51 in U.K., 89 in Europe) that had been publicly targeted by activist campaigns anytime within the period, 1 January 2017 to 28 February 2020. The share price analysis for each corporate began from the point at which the activist campaign started, tracked at intervals of 6 months, 12 months, and 24 months (where applicable). 

The data also includes share price performance of companies specifically during COVID (28 February to 31 August 2020), which had been subject to public targeting by an activist, anytime within the period, 1 January 2017 to 28 February 2020.

We compared the share price performance of those corporates against market indices (S&P 500 and STOXX Europe 600).

Summary of data

Performance vs Index – Region
Activist Targets – Share Price Performance 1
Performance vs Index – Type of Campaign
Activist Targets – Share Price Performance 2

A&M Activist Alert

A&M also produces the A&M Activist Alert, which is the most comprehensive statistical analysis of its kind. The analysis focuses on 1,597 corporates with a market capitalization of U.S. $200 million or more, listed and headquartered in the U.K., Germany, France, Scandinavia, Switzerland, Benelux, Italy, and Spain. The resulting predictive model successfully predicted the majority of corporates publicly targeted by activists since January 2015. The report is published twice yearly and individual companies can check their position on the Alert List by contacting A&M.

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