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10 Moves Your Company Should Make Now to Ward Off Shareholder Activists

10 Moves Your Company Should Make Now to Ward Off Shareholder Activists

The term “shareholder activism” evokes the image of a white knight. But in the 1980s, activists were called “corporate raiders,” a term that evokes a much different image. As the perception of activists has changed over the years, so has the means for dealing with them.

If there were such a thing as a playbook for dealing with shareholder activists, it would be required reading for all officers and directors of public companies. In the past 10 quarters, there have been more than 200 activist campaigns at U.S. public companies with market capitalizations greater than $1 billion. Even well-performing companies with strong balance sheets, excellent management, a disciplined capital allocation record and above average operating performance are not immune to activist threats.

Activists no longer need to have a large stake in a target company to drive major changes, either. Institutions hold more than 63% of shares outstanding at S&P 500 companies, in contrast to the 1980s, when institutional ownership never crossed 50% of shares. Thirty years ago, it would be rare for a large institutional investor to side publicly with an activist, but recently, major institutions have frequently sided with shareholder activists and even privately issued “Requests for Activism” for portfolio companies. In 2013, ValueAct Capital President G. Mason Morfit forced his way onto Microsoft’s board and reportedly helped oust longtime CEO Steve Ballmer, all while holding less than 1% of Microsoft’s outstanding shares. Morfit pulled it off because ValueAct had powerful institutional allies that were willing to flex their voting muscle.

How can companies defend themselves against an activist campaign—or at least encourage the activists to knock on someone else's door? By being prepared with the following ten strategic building blocks designed to ward off the threat.      

Ten Strategic Building Blocks to Prepare for Shareholder Activism

Published November 2016

© Copyright 2016. The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., its management, its subsidiaries, its affiliates, or its other professionals.

About The Authors

Jay Frankl
Senior Managing Director
Activism and M&A Solutions
FTI Consulting

John Huber
FTI Consulting

Steven Balet
Managing Director
Strategic Communications
FTI Consulting

Merritt Moran
Business Analyst
Activism and M&A Solutions
FTI Consulting

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The views expressed in this article(s) are those of the author and not necessarily those of FTI Consulting, Inc., or its professionals.
©Copyright, FTI Consulting, Inc., 2012. All rights reserved.