The past ten years have seen a high and increasing level of activist campaigns. There have been more than 300 activist attacks on major companies during this period. Among the major companies that have been attacked are, P&G, McDonald’s, ITW, DuPont, Motorola, Target, Pepsi, Heinz, Kraft and Home Depot. There are more than 100 hedge funds that have engaged in activism and they frequently gain the backing of ISS and major institutional investors, some of which have investments in activist funds. SEC rules do not prevent an activist from secretly accumulating a more than 5% position before being required to make public disclosure.

Hedge fund activism requires attention and warrants similar preparation as to that we recommend for responding to a hostile takeover bid. This memo is a revision of the one I did in 2007 as a supplement to my Takeover Response Checklist. In fact, some activist attacks are designed to change management or the board of the target in order to facilitate a takeover or to force a sale of the target. Careful planning and a proactive response are critical. Failure to prepare reduces a company’s ability to control its own destiny.

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