Do you have external advisers and a poison pill ready?
Of course, if activist smoke is already there, then having a team together that is ready and prepared to justify the strategy if necessary is a different story. Sobi’s Thomas Kudsk Larsen stresses, however, that this is not about defense. ‘What are you defending against? As a public company, you are for sale every second of every day,’ he says.
Still, it is important to know whether the activist playbook is up to date, says Steve Austenfeld of The Honest Company. ‘Do you know who would fill important roles on the defense team, including which outside advisers would be used: bankers, an outside PR firm, outside legal counsel and a proxy adviser?’ he asks. ‘Are the long-term strategy and goals current to give shareholders an understanding of how the company intends to create long-term shareholder value in comparison to the activist’s proposal? Do you have a poison pill on the shelf ready to go, or have you at least recently discussed one?’
Longer than a year may be viewed as too defensive for [poison pills]
On the poison pill topic, Austenfeld notes the importance of length and percentage if you’re looking for that crucial support from the big proxy advisers. ‘If it is for a year or less, ISS and Glass Lewis may be more supportive, believing that allows sufficient time for company management to state its long-term value creation plan to shareholders,’ he explains. ‘Longer than a year may be viewed as too defensive, limiting an activist from acquiring a larger percentage of the company and its ability to drive shareholder value.’
‘I like to think of what we do as being a constructive, engaged dialogue with companies. We try to bring value to the table,’ says Clearway Capital’s Gianluca Ferrari. ‘Companies hire consultants to do a similar job – and pay them millions. We’re essentially doing it for free with the ambition of profiting from better returns to shareholders.’
