In part three of our video series with Activist Insight, we discuss what companies are doing today to prepare for an assault from activist investors
In the first two parts of our video series with Josh Black, editor-in-chief of Activist Insight, we discussed how activists performed in 2016, their outlook for 2017 and where they were busiest during last year.
In this final installment, Black outlines his top tips for IROs if an activist shows up on their shareholder register.
Know the market and do your research
‘Any self-respecting IRO should be aware of the main activist funds out there and should be able to report to management that an activist has invested,’ Black says. ‘I think it always makes sense to hold a meeting to hear what the activist has to say. Usually the CEO is the person who holds the meeting… sometimes activists ask to meet with an independent director, especially if the CEO of your company is also the chairman.’
Understand the activist’s angle
‘The first thing is to understand what activists want,’ Black says. ‘They’re there to create money, not to make your life difficult.’
Brief your board and your shareholders
‘Once an activist gets to the point where you disagree with it and it still has conviction in its idea for the company, you’re probably going to get to a place where it becomes public,’ Black explains. ‘You should consult with your wider shareholder base and brief your directors. The board should already have heard any idea that an activist can come up with, no matter how outlandish you think it is… there’s a chance it will have to go to bat for your side when it comes to investor roadshows.’
Think like an activist
‘If an activist thinks your shares are undervalued or underpriced, you probably do too,’ Black notes. ‘You’re probably already looking at ways to improve the performance of your company… you should be highlighting to the market the ways you want to take the company forward. If you appear to be resting on your laurels, it becomes a much more difficult conversation.’
Click the video link below to watch the complete Q&A with Black, as well as the complete three-part playlist of our video series with Activist Insight.