Activists make European CEO heads roll on US$225-billion warpath

ACTIVIST investors are finding their European targets more willing to do away with management than heed calls for dramatic change – for now. 

A wave of campaigns launched in the last 18 months has been followed by the exits of chief executive officers at companies with a combined market capitalisation of more than US$225 billion, as indicated by data compiled by Bloomberg. These range from British telecom giant Vodafone to Swiss software developer Temenos.

Despite the personnel wins, many activists are still waiting for companies to enact deeper structural changes such as break-ups, which they say are needed to boost flagging share prices, and better position the businesses for the years ahead.

“Break-up campaigns have been harder to execute in the past 12 months,” said Tom Matthews, a partner at law firm White & Case. “Merger-and-acquisition and IPO solutions are more difficult, given the closure of the debt and equity markets.”

In the meantime, heads have continued to roll. 

Last week, German drug and agricultural company Bayer, which has had to deal with pressure from Elliott Investment Management and Temasek Holdings in recent years, announced the early departure of chief executive officer Werner Baumann, as it seeks to move on from lawsuits tied to its ill-fated acquisition of Monsanto in 2018.

To be sure, Bayer was in the process of shaking things up at the top, even before the recent arrivals of Jeff Ubben’s Inclusive Capital Partners and small-but-loud activist Bluebell Capital Partners. The appointment of ex-Roche Holding pharmaceutical head Bill Anderson as Bayer’s next chief executive officer raises the prospect of activists turning up the heat on a potential split of the company.

It is a similar story in the UK, the activists’ favourite hunting ground in the region. 

Vodafone last year ousted chief executive officer Nick Read, amid commercial difficulties and a long-running share price decline. His departure came after Cevian Capital, Coast Capital and French billionaire Xavier Niel at various points built stakes in the company. Earlier in 2022, US activist investor Nelson Peltz revealed a stake in Unilever, and soon after, the British consumer goods company announced that chief executive officer Alan Jope would be stepping down.

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Meanwhile, in Switzerland, Max Chuard in January left as chief executive officer of banking software maker Temenos, which has faced calls from activist investor Petrus Advisers to change its management and conduct a strategy review. Temenos said that Chuard had decided that it was the right time to step down, having established a strong leadership team.

“Campaigns to remove directors have been more successful than those seeking to break up or divest businesses,” said Malcolm McKenzie, a managing director at Alvarez & Marsal. “This is driven, in part, by the sheer complexity of the decision process, and the size, risk and cost of the undertaking, (which underlies) any decision to divest.”

While the exits of chief executive officers can be caused by several factors, and the direct impact of activist pressure is hard to measure, the sheer number of executive departures in the region has been notable.

Other activists working behind the scenes on efforts to transform companies include Elliott Investment Management at SSE, and Third Point at Shell. Both arrived at the UK-listed energy groups with a common pitch – break up the company, and focus more on renewables. Both are yet to be placated. 

Oliver Scharping, a portfolio manager at Bantleon, said that most activists in Europe are avoiding the public hectoring of companies in favour of private talks with boards.

“Activists have tried the tough-guy approach in the past, but they champion a less confrontational style today,” Scharping said. BLOOMBERG