Investment banks offer avoidance advice, as activist investors amass wealth for efforts
Activist investors have gained a lot of money for their efforts to shake up the way companies do business. In response, investment banks are giving advice to clients so they can anticipate and foil these investors before they even show up, Bloomberg reported.
A "vulnerability assessment" is offered by Deutsche Bank while a "proprietary model" that looks at firms that are at high risk for investor activism is developed by Barclays. Other lenders like Goldman Sachs Group Inc, Morgan Stanley and JPMorgan Chase & Co have endorsed similar services to prevent the likes of Bill Ackman and Dan Loeb from launching campaigns that are geared towards making changes in management, forcing asset sales and increasing dividends, the report said.
Credit Suisse Group Head of Contested Situations Chris Young told Bloomberg, "It's literally a matter of career life and death for management teams and directors who are subjected to activism. Many CEOs and directors have decided they'd rather go through the unpleasant process of taking a harsher look at themselves in private than a very unpleasant process in public."
The preemptive services are being offered as a rise of activist campaigns last year went to the ranks of Apple Inc, PepsiCo Inc, Microsoft Corp and other large corporations in the US. Damien Park told Bloomberg that the number of individual US firms targeted by investor activism in 2013 went up 10% to 356 compared to 2012. Park runs Hedge Fund Solutions, a company that gathers data and gives advice on boards and investors on activism.
Park also revealed that funds that have undertaken activist campaigns increased 17% to 448 in 2013 as their coffers increased. Activist hedge fund assets reached around $89 billion in the third quarter of last year compared to $66 billion in the same period the year before, according to figures gathered by Hedge Fund Research.