U.S. activists are increasingly looking to the U.K. for opportunities. What is increasing the appeal of the market?
Tom Matthews (TM): Many listed companies in the U.K. and Europe continue to be perceived as undervalued compared with those listed in the U.S. This perception has contributed towards recent strong levels of U.K. takeover activity by both strategic and private equity bidders, including many competing bid situations.
Other factors which continue to attract U.S. investors to the U.K. market include a stable and activism-friendly regulatory environment.
The U.S. also has a more mature activism market compared to the U.K., with many experienced and deep-pocketed activists pursuing similar strategies. For U.S. activists willing to venture beyond their home market, the U.K. and other European markets continue to present many attractive untapped opportunities.
The closed-end fund sector has been presenting as a key driver for activism in the U.K. Is this a relatively new draw and how concerned should the U.K.'s investment trust sector be?
Alex Woodfield (AW): Many U.K.-listed investment trusts (whether focused on illiquid assets such as real estate and infrastructure or on liquid assets, including shares in other listed companies) have struggled in recent years to address persistent discounts to net asset value (NAV). This has resulted in significant opportunities for shareholder activism and takeover activity, with many of such takeovers being catalyzed by activism, including as a result of activists campaigning for strategic reviews.
TM: A number of activists have focused specifically on the investment trust sector, including Saba Capital Management, one of the world's largest investors in the sector. In the past couple of years, Saba has invested heavily in U.K. investment trusts and has negotiated buybacks, liquidation schemes and other transactions with several of those trusts to allow all shareholders to benefit from the opportunity to exit at NAV. In recent months, the wider investment trust market has increasingly been proactively taking steps to reduce NAV discounts, benefiting shareholders of those investment trusts and with the parallel intention of reducing their vulnerability to activism.
How are U.K. company boards responding to U.S.-style activism, which tends to be viewed as more aggressive in a market where behind-thescenes negotiations are often the norm?
Sonica Tolani (ST): Looking back several years ago, there was a widespread immediate attack-vs-defense mentality when it came to activism. Many U.S. activists would come to the U.K. and seek to deploy a more aggressive U.S. market approach to U.K. situations. At the same time, U.K. boards would often have a knee-jerk reaction to being approached by an activist, immediately pulling down the shutters and minimizing engagement.
In recent years, the increasing levels of activism in the U.K. have led to greater levels of sophistication on both sides. U.K. boards (and, importantly, their advisors) now increasingly understand the potential value of thoughtful engagement with an activist. The mantra for the majority of situations now, which is recognized by most activists and boards alike, is to seek to engage first, potentially avoiding the cost and distraction of a public campaign.
All that said, we have observed a trend over the past 12 to 18 months of activists (in particular those from the U.S.) dialing up their levels of aggression when it comes to board representation. We have not only seen demands for multiple board seats but also calls to sweep entire boards.
AW: Activists' techniques (including those traditionally favored by U.S. activists) are also increasingly being adopted by other investors in the U.K., including traditional long-only, private equity and debt/special situation investment funds, and even individual shareholders. Unlike activist investors, these other investors do not usually make investments with the expectation of deploying these activist techniques, but they increasingly view such techniques as part of a toolbox which they are willing to deploy where necessary. Well-advised boards should treat all shareholders as potential activists and even, ideally, act as their own activist to assess potential vulnerabilities and preempt any potential engagement.
Many headline campaigns have seen activists push targets to move their listing from the U.K. to the U.S. in search of better valuations. Do you expect to see this present in the activist playbook in 2026?
TM: There has been an ongoing theme in recent years of activists pushing for U.K.-listed companies to add a U.S. listing, migrate their primary listing to the U.S., or spin off a division to be listed in the U.S. In part, this reflected a perceived weakness of the U.K. markets compared to those in the U.S. However, recent moves to enhance the competitiveness of U.K. markets may have reduced the focus on choice of listing venue compared with 12 to 24 months ago. Nonetheless, adding or changing listing venues will remain a thesis for some companies, based on their specific circumstances, and the optimal configuration of listing venues will remain under consideration for many companies on an ongoing basis regardless of any immediate pressure from an activist.
We also expect to continue to see the theme of U.S. listings forming part of the thesis of break-up campaigns. Rather than arguing that a company should move its listing, an activist may perceive more immediate value in arguing that a U.S.-focused part of the group should be spun-off and listed in the U.S.
With a rebound in M&A expected by many, how are activists likely to use the lever in the U.K. market?
ST: In the past couple of years, as global M&A activity continued to be impacted by geopolitical uncertainty, we were seeing a focus on alternative forms of M&Arelated activism campaign, such as break-ups, spin-offs, restructurings and migrations.
More recently, we have been seeing strong levels of public M&A activity in the U.K. (including numerous competitive situations) and private M&A deal pipelines appear increasingly busy. In this context, we expect to see an uptick in activists pushing for M&A and strategic reviews or, for bad deals, opposing the terms on which M&A is being proposed. However, recent changes to the U.K. listing rules have significantly narrowed the circumstances in which U.K. companies are required to obtain shareholder consent for material M&A transactions. So, in practice, the opportunity for activists to oppose conventional M&A transactions is now largely limited to proposed public takeovers.
AW: As we have observed over the past few years, we continue to see an increasing number of activist investors who are willing and able to consider pursuing take privates themselves. Activists pursuing such transactions typically seek to partner with private equity funds, who have been showing renewed deal appetite in recent months.
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