Overview

Shareholder activism is increasing. In the new environment in which we find ourselves, all managers of “blind pools” of capital are under pressure to demonstrate that they are adding value to their investments. This obviously extends to stakes in listed companies, be they held by long-only institutional investors, once regarded as the antithesis of the activist, or by hedge funds.

In the last few weeks alone we have seen the chairman of Mitchells & Butler, Britain’s largest pub operator, voted off the board by a group of major shareholders, and a leading shareholder in Pinewood Shepperton, the film studios group, calling upon the chairman to hold talks to discuss the future business strategy of the company.

In parallel to this, regulators are taking steps to clear some of the legal obstacles which have previously restrained shareholder activism. Clearly, shareholder activism embraces a wide range of behaviours, from constructive dialogue to very public campaigns of criticism.

This article summarises the relevant recent regulatory steps, identifies the range of tools available to activist shareholders and considers how listed companies should conduct themselves in the face of activist action, particularly when such action goes past the point of constructive dialogue.

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