By Jim Kelly, a Partner at the strategic communications firm, Domestique. With more than 20 years’ experience in financial PR, his expertise lies in the area of financial transactions – M&A, equity capital markets, capital restructures, as well as major reputational issues confronting public companies.
The start of 2019 feels a little like the GFC with a number of domestic and international events just itching to make it a tough year.
A Federal election at home, a Brexit still to be negotiated, social unrest in Europe, rising interest rates in the US and volatility plaguing Asian markets. While we could go on forever, the plethora of issues will give Board’s pause for thought before they delve into their extensive M&A pipelines this year. Any deals are going to need to be well thought through to sell to shareholders and others in the market.
In the wake of the Royal Commission, we will continue to see an increased focus on executive remuneration and we are going to hear the words “social licence” a lot from our corporate leaders as they seek to rebuild the standing of corporate Australia in the eyes of the public.
Strikes against remuneration reports are on the up and continue to be a mechanism for shareholders to vote down excessive remuneration but also to voice a protest against underperformance and social license issues. Companies facing a second strike next year are also more exposed to activist investors looking to spill Boards and wield greater influence on strategy.
While we have been waiting for US style shareholder activism to hit our shores for some time, we can be confident that 2019 is going to see more Blue Sky and Corporate Travel Management type scenarios play out.
Shareholder activism can take many different forms and the activist’s DNA in the local market is certainly taking a typically Australian twist. Not to be outdone, the increasing wealth and influence of our major super funds mean they’re wanting to be king makers. It is understandable they want a seat at the table and an opportunity to invest directly alongside PE or infrastructure funds but the market will be watching closely for the inevitable occasion where a clever structure ultimately locks one out of a deal at the same time they are mocking other investors out of another.
Whether it’s to fight the shorts, solidify their social licence or execute M&A, Boards are more alive than ever to the need to be prepared on the communications front as a flurry of activity approaches in 2019.
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