European Stock Story of the Month – Akka Technologies (Jan, 2022)

Castlefield runs several equity funds for its clients, and in addition to the strong sustainability ethos of our investment process, engagement is an overriding element the team utilises to highlight prominent issues and bring to bear influence with management teams. Although we are one of the smaller institutional investors on companies’ shareholder registers, we still manage to get our voice heard, and have frequently been asked to join subgroups chosen by company management to participate in topics ranging from remuneration, board independence and more recently the requirements needed for a Net Zero Policy.

We engage frequently and we measure the consistency of corporate contact. We build relationships with the company officers over years not only to cultivate our knowledge of the business, but also to provide a flowing archive of understanding of the companies’ life cycles which in an arboreal analogy, start off as saplings, sometimes growing into mighty oaks, sometimes being eaten up by other larger beasts via acquisition, and very rarely thank goodness, withering away or perishing.

Our European stock story for January 2022 is one of the most interesting small caps we’ve watched and invested in over the last decade. We’ve written about Akka Technologies before but feel that its current situation is again worthy of highlight. Belgian domiciled Akka is now a global leader in the mobility engineering segment and has operations in 25 countries, powered by 21 research centres[1]. Having started off as a small high value add French company servicing the likes of Peugeot, Citroen and Renault, Akka now works across transport industries, with Airbus planes, ABB trains, and Audi automobiles[2]. Its aim is to improve the efficiency of vehicles and to innovate towards new technologies.

For example, electric powered airplanes would mean significantly lower carbon emissions - prototypes are well past initial trials, and Akka’s work in the auto industry has accelerated carbon emission control. An acquisition in the US provided a beachhead into America’s huge mobility markets, and CEO Ricci’s digital solution strategy came to fulfilment with the subsequent purchase of a firm in the Nordics. Akka employs around 20,000 people[3].

Having suffered very severely during the spring and summer of 2020, founder Mauro Ricci invested more of his own capital to bolster the business. A prior acquisition of the staffing business PDS Tech in the States could have provided investors with a clue as to what would happen next. At the end of July last year Swiss based Adecco, a global leader in recruitment and staffing, made a successful bid for Akka, winning the support of shareholders. The plan is to combine Akka with its own business Modi to build ‘high value technology led services in less cyclical markets’[4]. With a planned workforce of 50,000 the new structure will become the global number 2 in the engineering R&D market. Ricci talks about innovation that customers need being a ‘never ending story’ and we subscribe to this constant change.

We feel we can assist companies in the journey they navigate by sharing ideas about best practice, independence from conflicted interests, and improved governance structures. Just before the announcement of the takeover we spoke with Akka about a different board structure in the wake of the huge capital raise in the previous October, amongst which included the topics of board expansion and independence. We were keen to offer feedback on these issues but as it transpired, events overtook us. We spoke in some depth about the pivotal role of Ricci as founder CEO and how his role impacts strategy versus the execution of that strategy. Succession was a clear topic of discussion as was adequate independence of oversight.

Much of Akka’s growth has come from acquisition, and so restructuring has always played a constant in the company’s evolution. We admire Ricci’s emphasis on reskilling his engineering workforce rather than the usual blunt tool of redundancy and we have written before on the merits of his AKKAdemy. Negotiations with European trade unions are a tough challenge particularly in France and our engagement often crosses paths with issues concerning labour and the workplace.

Akka’s journey is now picking up speed and scale. Our own engagement journey will also change as we build a relationship with the new entity and try to understand the challenges of the next decade, which we hope will be as exciting and rewarding for our clients as the previous one.

 Written by Rory Hammerson


Sources and references

[2] (p57-58)



Information is accurate as at 06.01.2022. Opinions constitute the fund manager’s judgement as of this date and are subject to change without warning. The officers, employees and agents of CIP may have positions in any securities mentioned herein. This material may not be distributed, published or reproduced in whole or in part. With investment capital is at risk.