Shareholder Activism: Proactive Defense and Informed Response

ICR, the financial communications consulting firm, recently released a discussion paper Shareholder Activism: Proactive Defense and Informed Response. The paper explores the current environment of shareholder activism driven by “Sharks,” “Wolves” and “Jaguars,” as well as these activists’ goals, motives and tactics. The paper also presents a well documented strategy for issuers outlining potential vulnerabilities to attack, defenses against attack, as well as how to best respond to attack

Since the first company went public, activists have been utilizing creative and often confrontational strategies to engage with issuers to achieve their sometimes self-serving goals as well as positive returns from their investment portfolios. Such shareholder activism, traditionally the purview of institutional investors such as labor unions, public pension funds, and religious organizations, has become increasingly contentious and problematic for issuers as the rapidly growing hedge fund asset class has moved toward direct activism.

While “activism” among shareholders is not necessarily new, the credit crunch of last summer has fueled hostility in the current activist environment as more hedge funds chase fewer investment opportunities and face a depressed capital market. This environment has created a scenario whereby activist investing increasingly becomes the norm as hedge funds try to differentiate themselves and continue to deliver the outsized returns that they have promised to their investors. As a result, public companies need to reconsider their preparedness and carefully address how best to protect their position in the public markets.

The paper is available here.