Let's Do Lunch - Chapter Meeting on Shareholder Activism
Summary of the Presentation at the Cincinnati NIRI Chapter Meeting on January 9, 2013
The Cincinnati Tri-State Chapter of NIRI held its second meeting of the season on January 9, 2013. Ted McHugh and Tyson McCabe of the Special Situations Advisory Team at Thomson Reuters discussed trends in activism, helping IR professionals prepare for challenges companies may face when proxy season kicks off. Ted and Tyson cited reasons to expect an increase in activism during 2013. Below are several key points from their presentation.
- Firms identified as displaying activist tendencies total 205 with approximately $1 trillion in assets.
- Two main types of activist investors exist, based on intent: 1) pushing for better corporate governance, and 2) looking to unlock shareholder value through more aggressive means.
- Top demands by activist include: board seat control, forcing changes in management or strategic direction, shareholder rights, removal of "poison pills" or establishing staggered terms for board members, M&A related activities.
- Activists are becoming more involved, relative to recent years, in companies with larger market capitalization.
- One activist strategy is known as "wolf-pack", with multiple hedge fund activists working together to force change on a target company.
- Activists are attracted to companies that are undervalued or underperforming, going through major changes such a CEO transition or restructuring, or that have high levels of assets easily monetized.
- Effectively dealing with activists include:
- Monitoring shareholder bases and proactively managing relationships with top investors.
- Building a unified message that address investor concerns, prior to activist activities.
- Communicating with activists, if activity commences.
- Formulating responses with supporting arguments.
- Continue to communicate broadly with shareholders regarding strategic and financial plans.
The presentation from the meeting is available here.