A sure sign that shareholder activism has become more prevalent is when large cap and well-run companies like Apple and Microsoft attract the interest of activist investors, noted Keith Gottfried, a partner with the law firm of Alston & Bird LLP who leads the shareholder activism defense practice.
His advice to boards of directors: be prepared.
“The activist playbook has become more sophisticated,” he told participants of a webinar. “Today’s activists are knowledgeable, well-prepared and well advised.”
He suggested that boards of directors have a game plan to anticipate activist activity. And, if the activists come knocking, he suggests a team approach to engaging with activists.
“First, know the activists’ issues,” he said. “Some activists are focused on breaking up companies to unlock shareholder value.”
It takes coordination to respond effectively.
“Put together a team of internal and external resources,” he said. Insiders would include the CEO, CFO and investor relations. “You’ll want to include the proxy solicitor to understand the issues of the various shareholders as well as special counsel since the internal legal resources do not regularly deal with activists.” It’s also important to include others such as communication experts who work with boards of directors to help them learn how to be effective in engaging with activists, he said. “Think of any proxy battle as a campaign,” advised Gottfried. “You not only need message points and speeches but an ability to get the messages out to the right audiences at the right time.”
He sees activism only increasing. “The success of activist investors is attracting more investment. Activist investors have convinced fellow shareholders that they can help to unlock shareholder value.”