Traditional asset managers are beginning to look to activist investors for how to bring about change in their portfolio companies. While most firms have thus far been content to communicate their opinions and ideas directly, recent trends show they are reaching into the activist toolbox more often: appearances at shareholders’ meetings, public statements about business strategy or commentary in business and finance media are becoming more common. This is a new development for continental Europe.

At the same time, public companies are increasingly finding themselves targeted by activists. The crux of successfully navigating both traditional institutional investors as well as those known as having primarily activist strategies? Trust.

In the United States and the United Kingdom, dealing with activist investors is nothing new. In continental Europe on the other hand, especially in Germany, businesses will need to quickly get used to the idea that they could be targeted by an activist investor at any time.

Activist campaigns are on the rise in Germany. According to the monthly business publication “Capital,” there were two such campaigns in 2015, growing to nine in 2016. In 2017, there continue to be many activist campaigns being conducted in Germany, and not simply limited to major engagements like Elliott at OHB, an air and defense company, or machine manufacturer GEA, but also smaller firms like AOC, most-recently-targeted comdirect, and Stada. Activist investors are here to stay.

Institutional investors increasingly see themselves as drivers and catalysts for change at the companies in their portfolios. According to the Edelman Trust Barometer Special Report: Institutional Investors, 87 percent stated they would support a reputable activist if they believed a change or transition in the business model made sense. At the same time, 80 percent of those surveyed agree that most businesses are not prepared for an activist investor campaign.

On the one hand, this means companies must prepare themselves by watching what their peers are doing and engaging in comprehensive scenario planning, while at the same time keeping an open line of communication to their stakeholders, especially their shareholders. A commitment to the latter is necessary to build up the most important asset for withstanding campaigns and attacks: Trust.

Institutional investors take action based on trust: 77 percent said they invested in or increased their positions in companies they trust; 50 percent said they voted in favor of the board; and 39 percent voted in favor of management in the last 12 months. Trust can be a deciding factor in defending against activist investors.

On the other hand, institutional investors are just as likely to act if they don’t trust companies or management. For companies they distrust, 73 percent of institutional investors said they would not purchase shares, 37 percent had voted against the board, and 23 percent had supported an activist investor in the last 12 months.

In Germany, a further trend is emerging, mirroring the one that can be seen across the world. Institutional investors see themselves as a driving force for change within business, and in doing so are more frequently adopting an activist approach to influence corporate policy, business strategy and even corporate governance, as they see fit. Up until a few years ago, these conversations may have been confined to investor meetings, roadshows and other one-on-one situations. Now however, comments to media or speaking opportunities at shareholder meetings are seen as opportune moments to make their point of view known.

To protect against activist campaigns, while at the same time understanding the expectations of institutional investors, one thing must be made clear: It all starts with trust.

Alexander Schmidt is head of Financial Relations, Edelman.ergo.