For most U.S. Corporate Secretaries and Investor Relations professionals, the ever-present threat of an activist investor situation is rarely far from mind. Rightfully so – in 2019, 474 U.S. companies were publicly subjected to activist demands1. In 2018, that number was 5061. Activists are also deploying record amounts of capital2 into these campaigns and employing increasingly sophisticated strategies and tactics. Furthermore, no industry appears immune from activist demands, according to the research below from Georgeson’s 2019 Annual Corporate Governance Review:
Defend Against Activist Investors
The activism landscape is constantly changing, and you face more significant governance and reputational risk from more directions than ever before. You need a partner that can help you navigate through the complexity. When you partner with Georgeson, you'll be working with a team that can help you control your outcomes, preparing your executives, the board of directors – and you – to respond to the broad spectrum of activist investor tactics and be equipped to defend against them, if necessary. Importantly, we can advise you on your best course of action based on potential outcomes. Count on experts who bring together institutional investor, legal, issuer, proxy advisor and solicitation experience to benefit you and your objectives.
8 Steps to Take to Prepare
Activist situations are unpredictable, and companies should be prepared for the possibility at any time. While the course of preparedness can vary depending on industry, these eight steps will help most companies be prepared:
1. Build your defense team
Identify an internal response team and identify and/or retain external advisors that can help you respond, including strategic governance and proxy advisors, legal counsel, investment bankers and PR or crisis communications firms.
2. Financial evaluation
Evaluate company strategy from the perspective of how an activist would view your performance.
3. Corporate governance vulnerability assessment
Have your proxy solicitor and its advisory team analyze your company’s corporate governance from an activist campaign viewpoint.
4. Structural defenses
Ask your solicitor to review company charter and bylaws and ask counsel to assess legal strengths and weaknesses.
5. Investor relations
Your IR team should screen meeting and call requests from activists and maintain an understanding of your investor population.
6. Shareholder outreach strategy
Lean on your proxy solicitor to help you identify and track your shareholder composition and top shareholders, understand the activist and proxy advisory firm profiles and plan and execute strong engagement programs.
7. Stock analysis
Your proxy solicitor can review your stock trading so you can understand changes in ownership over time.
8. Train and educate the board and executives
Advisors such as your proxy solicitor, corporate governance advisor or legal counsel can help you “train” the board and management in how to respond to an activist attack with a “mock proxy fight.”
Prepare for Activist Investor Possibilities with the Right External Team
Selecting your proxy solicitation partner is critically important because the right partner will bring diverse experience and perspectives to optimize your preparation and defense strategies. A proxy solicitation firm such as Georgeson provides robust advisory services to help you gain better control of the situation by identifying and analyzing your shareholders, modeling predictive vote outcomes, scheduling investor meetings, organizing meetings with proxy advisory firms, running the proxy solicitation process and tracking the flow of proxies and votes.
Georgeson can assess your company's corporate governance vulnerabilities from the perspective of investors, activists and large institutional holders, and analyze for you what concerns are worth addressing or explaining – and tell you how. Count on Georgeson to prepare you, your company and your board for the threat of activists – and rely on 85 years of experience and global resources to help control your outcomes.
Learn more about our activist investor preparation and defense services and contact us today to find out how we can help you worry less about activist investors.
12019 Annual Corporate Governance Review
2New York Times. An Epic, and Costly, Boardroom Battle at Procter & Gamble. Creswell, Julie.