Harnessing technology to prepare and plan a defense

May 12, 2022 | Case Study

Harnessing technology to prepare and plan a defense

Darren Novak, Global Head of Activist Defense London

UBS is a leading global investment banking, wealth and asset management group. Headquartered in Switzerland, it is present in all major financial centers and is the largest Swiss financial institution in the world.

Investor activism has gone from the fringes of M&A activity to becoming one of the central drivers of deals in recent years as activists increasingly pressure company boards to make change and generate greater value.

In the past, activists have been perceived as hostile agitators. Now, many are perceived, whether rightly or wrongly, as more constructive agents that work with the support of leading shareholders.

“Activists are deep value investors who create their own catalyst for change,” says Darren Novak, global head of activist defense at UBS investment bank. “Large institutional shareholders have now become comfortable with activists and are open to what they have to say. There is a greater level of ongoing engagement.”

Activism has reached record levels in both the US and Europe and is here to stay. It’s one of the biggest challenges facing company CEOs. It’s also a big opportunity for investment banks because if they can identify the next target of activists, they can become a trusted boardroom advisor.

A pivotal role in the process

Technology that uses AI and algorithms has a pivotal role to play in identifying companies that may come under attack from activist shareholders. That can then help boards to plan and prepare. This could prove to be a catalyst for a strategic review that could lead to companies selling off assets or repositioning themselves.

“Big data can be used to find patterns that you would not otherwise find. It adds a different layer of objectivity,” says Novak.

Big data can support bankers as they look to provide activist defense advice. The problem is that it can be difficult for close advisors to deliver unflattering views to CEOs, which is where technology comes in. By using empirical data, UBS can offer objective analysis to a company CEO, based on data and research, rather than through the personal judgement of an individual banker about a client’s strategy.

A balancing act

Banks have a long tradition of treating non-public information they obtain from their clients confidentially, and it is this level of trust that underpins advisory relationships.

“Banks now have unparalleled information about clients and this means M&A bankers have the scope to cover more clients with deeper data,” says Ronald Jansen, managing director and head of data and analytics at UBS.

This can enable private equity firms and acquirers to identify potential targets more quickly and with a greater understanding of valuation. But increased data can lead to information overload and it is important that technology is tailored to boost productivity.

“M&A is a very complex process and hard to automate. Unlike other areas like sales and trading, M&A remains a people business,” says Jansen.