Shareholder Activism in Germany

Amadeus Moeser is an associate at Sidley Austin LLP. This post is based on his recent Sidley memorandum. Related research from the Program on Corporate Governance includes The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon Brav, and Wei Jiang (discussed on the Forum here).

Once an exception, activist investors have proven that shareholder activism can thrive in Germany. An increasing number of foreign and domestic activists have been shaking up German boardrooms over the last years. Even though there has been a decline of activist campaigns in 2018 (11 as of December 2018 compared to 20 in 2017 and 17 in 2016,) the overall trend regarding shareholder activism is going up. Since the activists have become familiar with the legal framework and cultural idiosyncrasies in Germany, the targets are becoming larger and the tactics more aggressive. During the last few years, several DAX 30 companies like Deutsche Bank, Adidas, E.ON, ThyssenKrupp and Volkswagen had to deal with activist engagements. In December 2018, Elliott disclosed a stake in Bayer. In 2018, 27% of the targets were large cap (18% in 2017) and 9% midcap (6% in 2017). While the measures of the activists haven’t changed much, the campaigns have lately been triggered by different factors. Activists increasingly target conglomerates, which are perceived negatively. The criticism has also often focused on long-established business strategies and the unwillingness of companies to reform them. Another relatively new reason to get involved in companies are reasons that can be summarized as ESG. Especially executive compensation and compliance issues have been popular. There have also been incidents of short-selling in Germany.

Another factor that makes Germany more attractive for activist campaigns is the change of the public perception of activists. It has changed from predatory to beneficial during the last years and as a result, shareholders as well as the media have an increasingly favorable stance towards activists. At the same time, activist interventions are winning approval from institutional investors and proxy advisors. In addition, the ownership of medium and large companies—DAX companies, in particular—is now geared towards foreign, especially U.S.-dominated funds like BlackRock, Fidelity, Vanguard and State Street. Such entities are more likely to embrace activism and become more active themselves than domestic institutions.

The German legal framework can benefit the activists as minority shareholders. Holding one single share entitles the owner to attend, speak and vote at general meetings, file countermotions before and at a general meeting and file proposals regarding the election of supervisory board members or auditors. Holding shares representing 1% or €100,000 of registered capital entitles the owner to request a special audit on certain events and specific acts by the management by a court appointed auditor. Holding shares representing 5% or €500,000 of registered capital entitles the owner to request that a shareholders’ meeting is convened or to request an amendment to the agenda of the general meeting (e.g. removal of members of the supervisory board, changes in the articles of association, vote of no confidence regarding members of the management board). Holding 10% or €1.000.000 of registered capital allows the shareholder to request an individual vote on the discharge of management and/or supervisory board members.

Two prominent cases have marked the beginning of a new epoch in shareholder activism in Germany. First, the proxy contest against STADA in 2016, which stood out for its aggressiveness and marked the first ever removal of a chairman of the supervisory board of a big company in the context of a proxy. And second, the dismantlement of the DAX 30 company ThyssenKrupp. Both campaigns were characterized by hitherto unprecedented levels of aggressiveness.

Predominant Tactics and Prominent Cases in Germany

Operational, Strategic and Corporate Governance Activism

There are activists who have a long-term approach and whose main goal is to increase the company’s value. The activist pushes the management to run the business in a way they consider more efficient. In order to do so, an increasing number of activists in Germany are trying to gain direct influence on the decision-making of a company by changing the composition of the management board or the supervisory board. Some conditions inherent to the German corporate landscape played into the hands of activists and made it easier for them to gain support from shareholders, proxy advisors and the media: many directors have been serving for a long period, often without significant improvement of the company’s performance, scandals regarding the compensation of executives, a lack of transparency in the decision-making process, a passive leadership and of course an inexperienced management in regard to activism and thus no defense mechanisms. More than 30 board seats have been gained by activist nominees in Germany-based companies since 2014. A prominent example is the removal of the former chairman of the supervisory board of STADA by AOC and the subsequent implementation of AOC’s own candidate in 2016.

As aforementioned, a recent trend has been to target conglomerates. While some German conglomerates like Siemens, Bayer, Daimler, Continental or Volkswagen spun off certain divisions and established holding company structures in an attempt to preempt activists, others like Bilfinger, E.ON and ThyssenKrupp have been pressured by activists to separate from divisions. Especially the ThyssenKrupp case is a remarkable example of the new level of aggressiveness that boardrooms in Germany will have to get used to in the future.


The first activist to engage with ThyssenKrupp, a German conglomerate with focus on industrial engineering and steel production, was Cevian, usually known for constructive dialogues rather than aggressiveness. Cevian bought its first stake in 2013 (5.2%) and extended it over the years (18% in 2018). Cevian’s main concerns were the under-performance of ThyssenKrupp vis-à-vis its peers, poor shareholder returns and the company’s conglomerate structure. Cevian has constantly been asking the management to fix ThyssenKrupp’s overly complex structure with a business spanning submarines, chemical plants, ships, car parts and elevators. The management kept pursuing its own ideas without considering Cevian’s ideas. After a short and intense campaign, including numerous private discussions with the management as well as public interviews in several newspapers, the activist managed to install one of their partners in the company’s supervisory board in January 2015. In May 2018, Elliott bought a stake of less than 3% in ThyssenKrupp and signaled that it sees the current management as a problem. Facing pressure from two activists, the management of the company agreed to form a European steel giant in a joint venture with Tata Steel in an effort to please the shareholders and improve the performance of the company. Cevian and Elliott kept criticizing the terms of the venture for being skewed towards Tata and urged ThyssenKrupps’ CEO to negotiate a better deal. Elliott expressed concerns that the company, after moving too slowly for years, was now rushing to the finish line to close the steel merger on poor terms. This rushed joint venture was wind in the sails of Cevian and Elliott, and led to receiving support from other shareholders. Even the anchor shareholder of ThyssenKrupp called the arrival of the activists “a great opportunity.” Especially Elliott stepped up the game and put pressure on the management. It is unclear, which means Elliott deployed in doing so. The chairman of the supervisory board mentioned the occurrence of “psycho terror.“ The battle reached its climax in July 2018 when the CEO of ThyssenKrupp abruptly stepped down and the chairman of the supervisory board followed suit and resigned 10 days later. After creating a leadership vacuum, the time had come for the anticipated restructuring of the ThyssenKrupp conglomerate. In September 2018 it was announced, that ThyssenKrupp will split into two separate companies. The group will create two independently-traded public companies in its biggest restructuring since Thyssen and Krupp merged nearly two decades ago. The industrial goods business will be split from its steel and marine divisions, thereby creating ThyssenKrupp Industrials and ThyssenKrupp Materials.


AOC, a Luxembourg-based activist won a victory in a proxy battle it waged against STADA, a German maker of generic and over-the-counter-drugs. AOC acquired a stake of 5,05% in STADA (effectively AOC owned 6,98% with derivative contracts). After acquiring the stake, AOC stated that STADA was well-positioned to take advantage of attractive markets for its drugs and had big potential to grow the business and create value. However, the activist believed STADA was underperforming its peers. AOC claimed the underperformance was attributable to a supervisory board that lacked the competencies necessary to lead the company appropriately. The activist also criticized the excessive executive pay (STADA’s CEO earned more than twice the average of chief executives in STADA’s peer group) and the long serving terms of the CEO and the members of the supervisory board. The activist described STADAS corporate governance regime as “one of the worst we have ever seen in Germany.” On May 9, 2016, AOC submitted to STADA a motion for the agenda for the annual general meeting, initially scheduled for June 9, 2016, to remove and replace five of the nine supervisory board members. One of the nominees was a principal of AOC. The five supervisory board members AOC sought to replace served terms ranging from 13 to 33 years. On May 13, 2016, STADA agreed to nominate three AOC candidates, saying that it wants to avoid costly disputes but reversed its decision on May 22, 2016, and announced to select the candidates by themselves. STADA also postponed the annual general meeting to August 26, 2016. On July 1, 2016, AOC issued a press release saying that the chairman of the supervisory board of STADA rejected the activist proposal of being actively involved in the drafting of the selection criteria and the selection process for identifying the new shareholder representatives proposed to be elected to the supervisory board. As a result, AOC would submit to the company a joint shareholder proposal to elect its own slate of new supervisory board candidates. On July 6, 2016, STADA unveiled a slate of four new nominees for its supervisory board. AOC stated that it no longer had “any faith in the ability of the current management to conduct the process to select new candidates to propose to the shareholder meeting on August 26 2016, in a transparent, due and proper manner that serves the best interests of the company, its shareholders, and employees.” AOC then invited, through an appeal on a web-based shareholder forum known as Aktionärsforum, significant shareholders to participate in AOC’s selection process. On July 25, 2016, AOC unveiled a slate of four nominees to stand for election at the annual general meeting of STADA. The activist also expressed the wish to remove the chairman and the deputy chairman from the supervisory board. Eleven days before the annual general meeting STADA’s CEO stepped down. ISS backed AOC’s call for the removal of the chairman of the supervisory board and recommended shareholders to vote accordingly at the annual general meeting. ISS also said investors should vote against two of STADA management’s proposed appointments to the board. The climax of the confrontation between STADA and the activist was the annual general meeting with its proxy battle. While the activist was merely successful in replacing the chairman of the supervisory board, the conflict garnered huge interest in Germany, where such proxy battles have been unheard of. According to media reports, the annual general meeting lasted more than 14 hours. The chairman of the supervisory board was removed by approximately 56% of the votes cast and replaced by an AOC candidate. The proposal to approve the remuneration system for the management board was rejected by approximately 74% of the votes cast.

OHB/Wyser Pratte

Another example for the increasing aggressiveness of the activists is the OHB case. OHB, a German technology business focusing on space technology, was attacked by Wyser-Pratte. In the summer of 2017 Wyser-Pratte acquired a stake of 1% of the company and published a dossier on August 16, 2017 where the company was criticized for poor governance structures. The main points of criticism were the advanced age of the then supervisory board chairman Christa Fuchs (80) and the strong family ties of the founding family Fuchs within the management. The CEO of OHB was Marco Fuchs, the son of Christina Fuchs. Wyser-Pratte also found the other members of the supervisory board to be “subservient” to Mrs. Fuchs. Wyser-Pratte stated that the management of OHB resembles a feudal aristocracy. Wyser-Pratte ridiculed the OHB management and labeled it as unable to run a business. Mrs. Fuchs afterwards stated that she perceived the letter as a personal attack. It took the company eight days to publicly comment on the accusations in a press release, published on August 24, 2017. Of particular interest is the fact that Wyser-Pratte was most likely not concerned with securing a long term investment nor the restructuring of the company (70% of the shares are owned by the founding family). Instead what lied at the heart of his endeavor was the intent to boost name recognition of the company and consequently increase the share price.

Further recent noteworthy cases in Germany have been Bilfinger Berger/Cevian/Elliott, Gea/Elliott, Volkswagen/TCI.

Event Driven/M&A Activism

Germany has also been a fertile place for M&A activism. Especially M&A arbitrage has been popular in Germany. Activists either push for an M&A transaction to create value, oppose an M&A transaction because of concerns about value destruction or take advantage of scenarios where their stake is (at least partly) needed to allow a takeover to succeed or to implement certain corporate measures. Relevant thresholds used by activist to negotiate or litigate a better price are:

  • 75%: Usually, the takeover offer is made conditional upon the crossing of a minimum acceptance threshold. Most public takeover offers are subject to the condition that 75% of the outstanding shares are tendered. Following a successful completion of the takeover, the buyer will typically try to integrate the target’s business into its group of companies. This can be achieved through the conclusion of a domination and profit and loss transfer agreement (DPLA) that allows the buyer to control the target’s strategy and business decisions and access its cash flow. The implementation of a DPLA requires the buyer to hold at least 75% of the share capital.
  • 90%/95%: If the buyer wishes to own the target company in its entirety, he can force a transfer of the remaining shares held by minority shareholders. This so called “squeeze-out“ requires at least 95% of the outstanding shares (90% in the event of a merger-related squeeze-out).

When a takeover offer is announced or rumors regarding a takeover become more reliable, the activist acquires a stake in the target company big enough to have an impact on aforementioned corporate measures (usually 10-15%). The activist’s goal is to tender all or a portion of the own shares into the offer in order to help it succeed.

After the completion of the takeover the buyer might need the support of the activist again in order to implement corporate measures like entering into a DLPA or a squeeze-out. These measures require that all shareholders are made an offer to tender their shares for an adequate compensation. The activist will use this situation to negotiate a higher offer or commence court proceedings challenging the adequacy of the compensation offered in theses contexts.


Once the initial public tender offer from Bain and Cinven was announced in April 2017, Elliott acquired a substantial stake in STADA. Elliott’s goal was to tender a portion of its shares into the offer in order to help it succeed. In August 2017, Bain and Cinven won the majority of STADA shares (after lowering the initial acceptance threshold of 75% to 67.5% and eventually to 63%), offering €66.25 per share and cleared the 63% threshold set for the bid to go through. However, after the completion of the takeover, Elliott bought further STADA shares knowing that the next step would be a DPLA and that Bain and Cinven will again need Elliott’s support in order to implement the DPLA. A DPLA, as mentioned above, is a domination and profit and loss transfer agreement, which enables the buyer to control the target’s strategy and business decision and to access its cash-flow. The minimum acceptance threshold equals 75% of the outstanding shares. Bain and Cinven only held 65% of the shares. The DPLA must include the obligation to acquire the shares of minority shareholders in return for appropriate compensation. Elliott demanded at least €74.40 per share for its stake. Bain and Cinven said in a statement that while they were “convinced that the fair value of STADA shares is below the price required by Elliott” they would propose offering minority shareholders €74.40 in cash per share. Nevertheless, the offer was not accepted since STADA shares had already passed the €80 threshold at that time. Eventually, after Bain and Cinven improved their offer in the context of a public delisting tender offer and offered €81.73 per share in October 2018, Elliott sold its shares.

Kabel Deutschland/Elliott

After the takeover offer was announced by Vodafone on June 24, 2013, Elliott first acquired a small stake of 3,1% of Kabel Deutschland, a German cable operator, in August 2013 and increased its stake to almost 11% in September 2013. On September 13, 2013, Vodafone cleared the 75% threshold set for the bid to go through offering €84.53 per share. Elliott tendered a portion of its stake to help the takeover to succeed. After the deal was completed, Elliott started to dispute the offer price. Elliot argued that the offer undervalued Kabel Deutschland. In October 2013, after being pressured by the activist, the Kabel Deutschland management appointed a special auditor to establish the real value of the company’s shares. The management of Kabel Deutschland later tried to hold back the report and refused shareholders’ access to it. On July 16, 2014, Elliott, now holding 14,4% of the Kabel Deutschland shares, filed a lawsuit demanding a higher compensation (€225 to €275 instead of the offered €84.53 per share). The German legal system allows minority shareholders to go to court arguing over the real value of their shares in a takeover situation. In December 2014, the report by the special auditor was published. The report assessed, inter alia, that the company valuation internally conducted by Kabel Deutschland reckoned the per share price between €109.50 and €150.50 which was substantially higher than the actual offer price. In January 2015, Elliott requested an extraordinary shareholders’ meeting to look into whether the Kabel Deutschland management gave accurate and timely information to investors at the time of its takeover. The appointment of a special auditor was rejected for this purpose. Elliott commenced court proceedings against this decision. In June 2016, a German court handed a victory to Elliott by ordering another audit of the value of Kabel Deutschland. Court proceedings regarding the compensation are still ongoing.

Further recent noteworthy cases in Germany have been Uniper/Fortum/Elliott, Celesio/McKesson/Elliott, SLM Solutions/General Electric/Elliott.

Short Activism

Recent years have seen a dramatic increase in high-profile public short-selling campaigns by activists. Common allegations made by the activists are opaque accounting, irregularities in financial reporting or bad business strategies. Even though the European legislator passed new legal regulations for short selling in 2012 and market manipulation in 2014 and there are certain notification and disclosure requirements in Germany for short positions, the legal framework is widely seen as insufficient. German boards have to be aware of recent trends like anonymous online short attacks. Unlike classical short selling attacks by prominent hedge funds that capitalize on their reputation, the unknown and anonymous online short sellers take advantage of catching the target off guard. The management has to be able to respond immediately and comprehensively once an attack is launched. When it comes to short-selling, every minute counts.


The previously unknown activist Zatarra Research launched a campaign in February 2016 against the German payment processor Wirecard. Zatarra Research popped up on the web shortly before launching the attacks on Wirecard and published its accusations via Twitter and in a detailed 100- page report, released online on February 24, 2016 .Wirecard was accused of misleading accounting, committing fraud, money laundering and breaking German laws by managing the payments of gambling companies to their customers. The company strongly denied those accusations. However, the Wirecard shares tumbled by 25% within minutes. Three weeks later, on March 16, 2016, Wirecard published a statement regarding the accusations on its website. The German Financial Supervisory Authority BaFin opened investigations into Zatarra for possible market manipulation. Such anonymous online campaigns against public companies have become an increasingly common and effective form of short activism.

Ströer/Muddy Waters

The Ströer Group is a Germany-based operator of billboards. On April 21, 2016, Muddy Waters Research, a well-known short selling activist, released a detailed 60-pages report in which they stated their doubts about the company. Their interpretation was that Ströer had manipulated their balance sheets by exaggerating their organic growth, EBITDA and operating cash flow. Further corporate governance issues like transactions between board members and the company were criticized. On April 21, 2016, Ströer first briefly commented on the allegations. On April 22, 2016, Ströer published a press release on its website that commented on the main allegation but was not very substantiated. Muddy Waters’ report did not miss its goal. Ströer shares tumbled 18% at the close of trading. Obviously satisfied with the result of his actions, Carson Block from Muddy Waters stated in an interview with a German magazine that it is highly probable that they will return to Germany within the next three years. The German Financial Supervisory Authority BaFin opened investigations into Muddy Waters for possible market manipulation.


In 2018, ProSiebenSat.1, a German broadcaster, was attacked by Viceroy Research. The activist claimed in the report, published on March 6, 2018, that ProSiebenSat.1 had overpaid for acquisitions and was inflating revenues from transactions. The business strategy was also criticized. Viceroy Research claimed the company’s shares were trading at four times their real value. The release of the report coincided with news that the company was dropping out of Germany’s DAX Index. ProSiebenSat.1 shares fell as much as 9% after the release. In a statement published on March 6, 2018, the German broadcaster dismissed the allegations out of hand and said it would respond in more detail in due course. On March 7, 2018, ProSiebenSat.1 published a more comprehensive statement focusing on the main allegations. The German Financial Supervisory Authority BaFin opened investigations into Viceroy for possible market manipulation.

Another recent noteworthy case in Germany has been Aurelius/Gotham City.

Outlook and Recommendations

Even though it is not very likely that activism will reach US levels, shareholder activism today can be considered mainstream in Germany. Considering the recent success of activist campaigns in Germany, it is very likely that shareholder activism will play an increasingly important role in the future. Many activist campaigns have gained support from institutional investors and other shareholders and have been backed by proxy advisors. In terms of preparedness regarding activist engagements, German companies—especially mid-sized companies—are far behind many other countries. Boards of German companies have yet to adapt to the new conditions and must improve their corporate governance. The management boards will have to take a closer look at their potential vulnerabilities to activist attacks, and proactively eliminate any weaknesses to the extent possible. Companies should conduct vulnerability self-assessments to anticipate and pre-empt activist attacks, and assemble an internal activism response team as well as external advisors. The management must be aware that it is not only cold facts like a poor stock performance that can trigger an attack but also soft factors like board diversity or sustainability issues. German boards will have to improve communication with the press and shareholders. The company’s business strategy must be discussed comprehensively and publicly. A vivid and constant communication with all shareholders, especially anchor shareholders must be ensured. The management has to be receptive to criticism from its shareholders and the public relations mechanisms have to be improved. The company must be able to respond to accusations made by the activists immediately and in an all-encompassing fashion. A company’s reputation can be heavily damaged if allegations made by the activists are not clarified in due time. Executives will also have to prepare themselves for more aggressive and personal attacks.

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