31 July 2019

JPMorgan's 'secret sauce”

Bank turns to tech in tackling shareholder activism with launch of analytics tool in trending of advisers using tech to help clients fend off activist investors.

Agitating for change

JPMorgan Chase has launched a data analytics tool that aims to predict how investors agitating for change will influence other company shareholders. A record $1.1 trillion of US corporate takeovers in the first half of the year has pushed activist investors to the top of board agendas. According to data from Lazard, company dealmaking is the top target for activist shareholders who want to influence company strategy and policy change. While many advisers including Lazard, Goldman Sachs and Evercore are used to analysing client data to assess vulnerability to activists, JPMorgan says its method, which was presented to 200 company directors at a recent event, offers more useful insights than can be gained from analysing factors such as how much cash a company holds or how activists have behaved previously. Activists tend to take small stakes, and Anu Aiyengar, JPMorgan’s head of North American mergers and acquisitions, says “If all the focus of the company is on this very vocal and very loud shareholder . . . we think that is the wrong way to deal with it.”

“Secret sauce”

JPMorgan has created a big data set on previous activist situations at US-listed companies, and used it to build a profile of how various shareholders typically respond to individual activists. The system can isolate which shareholders are likely to support a given activists’ approach, JPMorgan said, and which are likely to sell their stakes if a given activist joins a company’s share register. The data are then cross-referenced against a client’s shareholder base. Huw Richards, heading digital initiatives at JPMorgan’s investment banking division, explained the algorithm connecting different data sets is the project’s “secret sauce.” Ms Aiyenger said the JPMorgan analytical tool has already proved helpful in situations over the past few months.