By Dr. Harald Selzner and Dr. Henning Schneider
Companies should expect an increased focus from activists on certain areas as the COVID-19 economic recovery begins.
The graphic above illustrates the top 10 most popular activists demands from 2015 to date in Germany. In the following article we highlight trends to watch out for.
As the German economy begins its COVID-19 recovery, companies should expect shareholder activists to increasingly focus on capital structure, imbalances, and vulnerabilities. In particular, boards need to be aware of the following trends related to:
- Shareholder activists will increase their activities to monitor and question the operational performance of companies in which they have invested.
- Limited disruption generally occurred to boards during the crisis.
- Equity positions
- Shareholder activists will likely build their positions through quiet accumulations.
- Shareholder activists could view larger corporates as “value” plays.
- Debt as an entry
- Shareholder activists will likely increase their exposures to structured and corporate credit securities in lower-quality bonds.
- Shareholder activists will likely assess COVID-19 responses from boards/management, as well as remuneration challenges.
- Shareholder activists will further increase their requests as to more and better governance.
- Corporate defense planning
- Companies should:
- Conduct vulnerability assessments
- Understand the changing activist playbook
- Participate in shareholder engagement strategies
- Environmental, social, and governance (ESG)
- Shareholder activists will likely further prioritize ESG practices (with a particular focus on the ‘S’).
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