Ask around about activist hedge funds in the US and you might get a mixed response.
A number of activists have built up an unpopular reputation of being short-term, focusing only on profits for themselves.
In Europe, the activist landscape is different, with different rules and social codes.
Business Insider caught up with Cevian Capital, the biggest activist hedge fund in Europe with more than $13 billion, to learn more about what works, and what doesn’t, across the pond.
It turns out that US-style activism, seen as hostile and aggressive, doesn’t work in Europe. European investors, who can get behind activist campaigns, don’t like it, according to Zimmerman.
“There’s a feeling that it’s not necessary to be that hostile here in Europe,” Zimmerman said. “People don’t like it.”
He added that the “wolf pack” mentality evident in many activist campaigns can be “very destructive.”
Here’s the key excerpt from the interview.
Rachael Levy: How do you get shareholders on board?
Harlan Zimmerman: We’re focused on making the companies more competitive in the long term, and more valuable. For us, this means a holding period that normally ranges between three and seven years. By making companies more competitive, because most of them are exposed to a great deal of international competition, if it’s a Swedish company, they might be exposed to German competitors, Chinese competitors, US competitors. By making them more competitive, we’re making them more secure for everyone, and we’re making them more valuable for shareholders.
And so when you’re talking about a company that has owners that are big, long-term institutions, then we don’t have to mobilize them in these sorts of initiatives. It’s the sort of thing they want to happen anyway, and for most companies, it’s the sort of thing they’re interested in, as well. They’re interested in becoming more competitive over the long term.
So it contrasts a bit with the US classical activist style, or at least the more hostile type where it’s short-term initiatives usually to get jumbo dividends or put a company in play or something of that nature, which can be very destructive. And where it often can be about bringing in certain types of shareholders, the “wolf pack,” as it’s sometimes called. And there you can have really a big conflict between what’s good for the company and its shareholders in the long term, and what’s good for some of the shareholders in the short term.
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