Publishing, media and telecommunications are the sectors most vulnerable to activist investors, according to new research.
The three industries score highest in a new ranking that assesses companies according to their susceptibility to activist campaigns.
Developed by FTI Consulting, the scoring system considers more than 25 different areas grouped into four broad categories: governance, total shareholder return, balance sheet and operating performance.
US and Canadian companies with more than $100 mn in market capitalization are covered by the research process – a universe of around 3,400 companies.
The top three sectors remained the same between the second and third quarter of 2019, according to FTI. There was movement further down the ranking, however, with real estate investment trusts (Reits), consumer non-durables and business services moving into the top 10 most-vulnerable industries.
‘Reits and business services may very well be moving to higher vulnerability scores in tandem, which could be correlated given the nature of those industries,’ says Jason Frankl, co-head of FTI’s activism and M&A solutions group, in the research.
‘We will keep a watchful eye on whether we see increased shareholder activism in these industries as we move toward next year’s proxy season.’
Looking ahead to 2020, FTI expects M&A to remain a key theme of many activist campaigns.
‘Developments to this theme in 2019, which we find likely to continue, were traditionally passive managers becoming vocal about understanding the strategic rationale behind mergers and being more open to siding with activists in their campaigns for higher prices in sale processes,’ says Frankl.
Activist activity remains at a high level globally, although not quite at the intensity of recent years. At the end of September, activist investors had launched 159 campaigns, compared with 185 over the same period last year, reports Lazard in its quarterly update on shareholder activism.
The third quarter of 2019 helped to bump up the numbers for the year, with 20 percent more activist campaigns than in Q3 2018, adds Lazard.
