UBS has released a new Big Data tool to predict and quantify the probability of a company being targeted by activist investors.
The new predictive algorithm, UBS-Guard (Global Utility for Activism Risk and Defence) aims to tackle the threat posed by activist investors undermining strategic business objectives by highlighting the risks of an approach and providing built-in analytics which offer insights into the underlying causes of vulnerability.
UBS-Guard can generate scenario analyses that quantify how various actions available to a company might affect its vulnerability score, for example the impact of share buybacks, dividend recaps and investment from new anchor investors. It can also generate analyses that identify historical campaigns against similar companies, to spot potential activist routes of attack.
Developed by the 'Data Lab' within UBS's Global Banking division in the Investment Bank, the tool uses over 220 million data points and analyses more than 5,000 historical activism campaigns to calculate the probability of activism for a wide range of companies.
Darren Novak, head of activist defence at UBS says: "Due to Covid-19 and volatile market conditions, many public companies have seen their pre-crisis valuation issues exacerbated and may see activist investors seize an opportunity to launch campaigns as we head into the second half of this year and particularly in early 2021. We anticipate seeing more M&A-related activist campaigns that will likely focus on seeking future opportunities for a quick sale or divestiture when M&A markets reopen."
UBS-Guard is being launched for use by public companies in Emea, following a successful trial in the Americas.