UBS has launched a new big data tool to predict and quantify the probability of a company being targeted by activist investors.

Activist campaigns by shareholders seek to push companies to undertake material strategic and operational change, and alter, influence, and at times even undermine company strategy, with deal making being a main focus. The new predictive analytics algorithm, UBS-GUARD (Global Utility for Activism Risk and Defence) aims to tackle this issue by not only predicting and quantifying if a company can expect an approach by activists, but by also providing built-in analytics with unique insights into the underlying causes of vulnerability.  Public companies are then able to take critical preventative action and arm themselves against future attacks, even before a move on the company is made.

UBS-GUARD can generate scenario analyses that quantify how various actions available to a company might affect its vulnerability score, e.g. 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.

The new 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 using state-of-the-art machine-learning methodologies.  It was developed by the ‘Data Lab’ within UBS’s Global Banking division in the Investment Bank, a team that brings together data scientists, engineers and bankers. It is now being launched for use by public companies in EMEA, following a successful trial in the Americas.

Darren Novak, Head of Activist Defence at UBS said: “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 .”

“Through UBS-GUARD, we can approach existing and potential clients and talk to them about their vulnerability to activism – from a truly objective perspective. While the tool does a lot of the basic analytical work, human interpretation, from  sector, country and activist defence experts, is essential in higher-level interpretation and application of the analysis to help clients understand how we can better serve their needs.” Darren said.

UBS-GUARD is available for corporate clients to access via their UBS Global Banking relationship bankers.