For activists operating in the French market, much of the engagement typically takes place behind the scenes. Is this less public approach likely to continue?
Diane Lamarche (DL): Private engagement has consistently been the preferred approach for activist investors in France, proving faster, less costly, and more effective than public campaigns. This explains why the Autorités des Marchés Financiers (AMF) and various think-tanks actively encourage confidential preliminary exchanges ahead of any public campaign, a position further reinforced by Paris Europlace in its June 2024 Guide du Dialogue Actionnarial, which promotes early and constructive engagement with issuers.
This behind-the-scenes trend will likely continue for several compelling reasons. French listed companies have become increasingly sophisticated in handling activist situations, recognizing the strategic value of pre-empting public campaigns through early engagement. Additionally, activists are no longer viewed solely as adversaries. Lead independent directors and board members now receive specific training on constructive dialogue with activists.
The approach delivers mutual benefits: activists achieve objectives efficiently while companies avoid reputational damage and market disruption. Successful recent high-profile cases of the French market demonstrate this model's effectiveness.
Given regulatory support, proven results, and growing corporate expertise, the decline in public campaigns reflects a maturing market where private engagement has become the established standard rather than a temporary phenomenon.
What are the most common demands for activist investors when pushing for governance reforms at their target companies?
Saam Golshani (SG): Activist investors targeting governance reforms typically focus on a set of well-established demands aimed at enhancing board accountability and transparency. In France, where governance standards have undergone a significant upgrade over the past decade, such interventions are now less frequent, but still arise when companies underperform or resist change.
The most common governance-related demands include the separation of CEO and chairman roles to avoid concentration of power, as well as efforts to refresh the board. Others are focused on the creation of specialized committees to address conflicts of interest or oversee strategy. On executive pay, activists in the market are also increasingly pushing for enhanced disclosure.
Simon Martin-Gousset (SMG): Activists may also push for the appointment – or increasingly, the replacement – of a lead independent director to improve shareholder dialogue. These demands reflect global governance norms and are often a prelude to broader strategic critiques. French issuers increasingly anticipate these demands but remain exposed where governance misaligns with shareholder expectations.
Many activists have used their position to take action to oppose spin-off plans with Ubisoft recently pushed to hold a shareholder vote on its plan to spin out three of its biggest games into a subsidiary. How do you expect such demands to feature in activist engagement for the year ahead?
DL: Event-driven activism and opposition to complex transactions have been a consistent feature of activist campaigns for over a decade, remaining the primary form of activism in recent years. Historically, activists have frequently advocated for spin-offs to break up conglomerate structures and unlock value.
The core objective of financial activists remains unchanged: maximizing shareholder value. This can manifest itself in two ways in the context of event-driven activism: either proposing strategic transactions (M&A, spin-offs, carve-outs, divestitures), as seen with Pernod Ricard and BP, or opposing management's proposed deals (or the initial proposed terms of such deals), as seen with Ubisoft and Vivendi.
SG: Looking ahead, we expect activists to continue scrutinizing complex transactions on a case-by-case basis rather than systematically opposing spin-offs. Their stance depends entirely on whether the proposed structure maximizes value. The Vivendi example demonstrates that aggressive legal activism can effectively achieve activist objectives whether temporarily or permanently.
Amid political and regulatory changes, markets such as the U.S. have seen support for ESG proposals lose traction with a notable drop off this season. How are such issues being received by investors in the French market?
SMG: ESG-focused activism has lost momentum in France, mirroring a global pullback, especially in the U.S., amid shifting investor and societal priorities. Several factors are seen as contributing to this retreat.
First, European and France's French regulatory frameworks (SFDR, CSRD, Article 29 LEC) impose extensive ESG disclosures, reducing the need for activist pressure. Companies have therefore pre-emptively adapted, anticipating scrutiny through enhanced transparency.
Secondly, economic uncertainty has led both financial and retail investors to prioritize short-term corporate profitability and purchasing power over climate ambitions. Shareholders themselves increasingly urge management to focus on core business performance rather than allocate resources to transition plans.
Thirdly, legal constraints under French corporate law limit the binding force of ESG resolutions, and recent doctrinal positions have challenged shareholder competence in this field, pending potential legislative clarification.
Finally, political ambiguity across Western countries makes it difficult for activists to assess the long-term economic impact of ESG policies. As a result, ESG activism in France now reflects a more cautious, pragmatic stance.
Reproduced with permission from Diligent Market Intelligence. For further information please visit https://www.diligent.com/.
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