Closing the value gap: An Empirical Analysis of Cevian Capital’s Activism in Europe

Abstract

This paper analyses the short- and long-term impact of Cevian Capitals activist investments on 16 public companies in Europe during 2010-2019. Cevian Capital is the largest activist hedge fund in Europe and is characterized as a “constructivist” hedge fund, employing a non-aggressive approach to activism. First, activists demands and key financial of companies prior to investment are presented. Then, an event study on the short-term market reaction to Cevian Capitals announced entry is examined over three event windows. Alongside this, key operational metrics of the target companies are analysed pre, and post Cevian Capitals engagement, all controlled for with an industry/size adjusted control sample. The findings show small to non-existent short term abnormal market returns to shareholders. The long-term findings show positive, statistically significant improvement in the operational metrics ROA one year post engagement, as well as an increase in the valuation ratio (price/book), with most metrics showing small and insignificant results.