Being prepared to defend themselves against M&A helps European companies to deal with shareholder activism but may not be enough, according to communications firm Kekst-CNC. While strategic takeovers are about “financial performance,” activist campaigns are “much broader in nature, taking in governance, board composition, issues of entrenchment and, increasingly, ESG considerations,” the report said, using an acronym for environmental, social, and governance issues.

An activist investor has more levers than a strategic buyer, and is also bound by fewer regulations, Kekst-CNC said in its report. Activists can act fast and add pressure for much longer than any straightforward M&A transaction, it added.

“Having begun our paper with the hypothesis that preparation for strategic defense is almost sufficient to be prepared for activist defense, we ended up having to turn this hypothesis on its head: strategic defense is a good starting point, but it by no means prepares companies fully for an activist attack,” Harald Kinzler, a partner at Kekst-CNC in London, told Activist Insight Online in an interview.

Kinzler has said that European issuers may be less prepared for shareholder activism than strategic M&A, given that the latter threat has been present for longer. He admits, however, that this is impossible to back up empirically.

In any case, Europe has become an attractive region for activist investors in recent years, with the number of companies publicly targeted by activists remaining at elevated levels. According to Activist Insight’s The Activist Investing Annual Review 2020, 135 Europe-based firms were subjected to activist demands, down 17% from 2018 but still high up compared with 2015 and 2014. Britain, Germany and France were among the most active markets for activism in 2019.