Yesterday Martin Lipton, of Wachtell, Lipton, Rosen & Katz, posted “Dealing with Activist Hedge Funds” at the Harvard Law School Forum on Corporate Governance and Financial Reform. This is more like a checklist included at the end of a treatise than a typical blog post and it promises many different uses from new associate training to inclusion in a corporate governance seminar syllabus (CHECK!), to helping clients understand the landscape of activist hedge funds. The post summarized common activist attack methods like proxy fights, withhold votes, proxy resolutions, and PR campaigns, etc. It also provides a company/target defense checklist addressing major categories of action such as:
- Creating designated corporate teams
- Shareholder relations
- Board of Director management strategies
- Stock & financial monitoring
Additionally, the post categorizes, in some detail, the various response options available to targets as well as documents the shifting landscape of hedge fund activism:
Many major activist attacks involve a network of activist investors (“wolf pack”) which supports the lead activist hedge fund, but attempts to avoid the disclosure and other laws and regulations that would hinder or prevent the attack if they were, or were deemed to be, a “group” that is acting in concert. Not infrequently, at the fringe of the wolf pack are some of the leading institutional investors, not actively joining in the attack, but letting the leader of the pack know that it can count on them in a proxy fight. The outcome of a proxy contest at most of the larger public companies is often, as a practical matter, determined by the votes of the three major passive investors: BlackRock, State Street and Vanguard. Major investment banks, law firms, proxy solicitors, and public relations advisors are now representing activist hedge funds and eagerly soliciting their business.
No question is this making my corporate governance seminar syllabus. I am so excited by this post that I am sharing it wholesale and encourage you to do so some productive procrastination or downtime between tasks by reading this article.
-Anne Tucker