Posts Tagged ‘Shareholder activism’

Do Activist Hedge Funds Really Create Long Term Value?

Posted by Martin Lipton, Wachtell, Lipton, Rosen & Katz, on Tuesday July 22, 2014 at 3:55 pm
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Editor’s Note: Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton and Steven A. Rosenblum that replies to the recently-issued empirical study by Lucian Bebchuk, Alon Brav, and Wei Jiang on the long-term effects of hedge fund activism. The study is available here, and its results are summarized in a Forum post and in a Wall Street Journal op-ed article.

About a year ago, Professor Lucian Bebchuk took to the pages of the Wall Street Journal to declare that he had conducted a study that he claimed proved that activist hedge funds are good for companies and the economy. Not being statisticians or econometricians, we did not respond by trying to conduct a study proving the opposite. Instead, we pointed out some of the more obvious methodological flaws in Professor Bebchuk’s study, as well as some observations from our years of real-world experience that lead us to believe that the short-term influence of activist hedge funds has been, and continues to be, profoundly destructive to the long-term health of companies and the American economy.

…continue reading: Do Activist Hedge Funds Really Create Long Term Value?

2014 Proxy Season Mid-Year Review

Editor’s Note: Mary Ann Cloyd is leader of the Center for Board Governance at PricewaterhouseCoopers LLP. This post is based on an edition of ProxyPulse™, a collaboration between Broadridge Financial Solutions and PwC’s Center for Board Governance; the full report, including additional figures, is available here.

This post looks at results from 2,788 shareholder meetings held between January 1 and May 22, 2014. We provide data and analyses on areas such as share ownership composition, director elections, say-on-pay, proxy material distribution and the mechanics of shareholder voting. We also look at differences in proxy voting by company size.

With about three-quarters of the 2014 proxy season complete, voting results continue to show that public company executives and directors must remain vigilant regarding corporate governance matters. In comparison to last proxy-season at this time, large-cap ($10b+) companies have attained higher levels of shareholder support both for directors and for executive compensation plans. In contrast, support levels for executive compensation plans fell at mid-cap ($2b–$10b), small-cap ($300m–$2b) and micro-cap ($300m or less) companies, and support for directors fell at mid-cap companies.

…continue reading: 2014 Proxy Season Mid-Year Review

Navigating Today’s Shareholder Activism Landscape

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday July 8, 2014 at 9:18 am
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Editor’s Note: The following post comes to us from Richard J. Grossman, partner concentrating in corporate governance matters and mergers and acquisitions, at Skadden, Arps, Slate, Meagher & Flom LLP, and is based on a Skadden alert by Mr. Grossman and Stephen F. Arcano.

Shareholder activism is the corporate topic du jour, be it in boardrooms, the media or Washington, D.C. While corporate boards and management need to understand the current environment and how we got here, their top priority is to develop comprehensive strategies for navigating the activism landscape. As activists have become more sophisticated, and activism more mainstream, approaches to dealing with activists are, by necessity, evolving.

…continue reading: Navigating Today’s Shareholder Activism Landscape

Hushmail: Are Activist Hedge Funds Breaking Bad?

Editor’s Note: Mark D. Gerstein is a partner in the Chicago office of Latham & Watkins LLP and Global Chair of that firm’s Mergers and Acquisitions Group. This post is based on a Latham & Watkins M&A Commentary by Mr. Gerstein, Bradley C. Faris, Timothy P. FitzSimons, and John M. Newell. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Increasingly, some activist hedge funds are looking to sell their stock positions back to target companies. How should the board respond to hushmail?

The Rise and Fall of Greenmail

During the heyday of takeovers in the 1980s, so-called corporate raiders would often amass a sizable stock position in a target company, and then threaten or commence a hostile offer for the company. In some cases, the bidder would then approach the target and offer to drop the hostile bid if the target bought back its stock at a significant premium to current market prices. Since target companies had fewer available takeover defenses at that time to fend off opportunistic hostile offers and other abusive takeover transactions, the company might agree to repurchase the shares in order to entice the bidder to withdraw. This practice was referred to as “greenmail,” and some corporate raiders found greenmail easier, and more profitable, than the hostile takeover itself.

…continue reading: Hushmail: Are Activist Hedge Funds Breaking Bad?

Shareholder Proposal Developments During the 2014 Proxy Season

Posted by Amy L. Goodman, Gibson, Dunn & Crutcher LLP, and John F. Olson, Gibson, Dunn & Crutcher LLP and Georgetown Law Center, on Wednesday July 2, 2014 at 9:02 am
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Editor’s Note: Amy Goodman is a partner and co-chair of the Securities Regulation and Corporate Governance practice group at Gibson, Dunn & Crutcher LLP and John Olson is a founding partner of Gibson, Dunn & Crutcher’s Washington, D.C. office and a visiting professor at the Georgetown Law Center. The following post is based on a Gibson Dunn alert; the complete publication, including footnotes, is available here.

This post provides an overview of shareholder proposals submitted to public companies during the 2014 proxy season, including statistics, notable decisions from the staff (the “Staff”) of the Securities and Exchange Commission (the “SEC”) on no-action requests and information about litigation regarding shareholder proposals.

…continue reading: Shareholder Proposal Developments During the 2014 Proxy Season

Proxy Advisory Firms and Corporate Governance Practices: One Size Does Not Fit All

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday June 18, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Bill Libit, partner concentrating in corporate and securities and municipal finance at Chapman and Cutler LLP, and is based on a Chapman publication by Mr. Libit and Todd Freier.

The 2014 proxy season, like previous seasons, has provided shareholders of public US companies with an opportunity to vote on a number of corporate governance proposals and director elections. Throughout this proxy season, proxy advisory firms have provided shareholder vote recommendations “for” or “against” those proposals and “for” or to “withhold” votes for directors. Certain proxy advisory firms, such as Institutional Shareholders Services Inc. (“ISS”) and Glass, Lewis & Co., LLC (“Glass Lewis”), have also published updated corporate governance ratings reports on public companies, including evaluations of a company’s corporate governance risk profile.

…continue reading: Proxy Advisory Firms and Corporate Governance Practices: One Size Does Not Fit All

Shareholder Activism in Germany

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday June 7, 2014 at 9:05 am
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Editor’s Note: The following post comes to us from Dirk Besse, at Morrison & Foerster LLP, and is based on a Morrison & Foerster publication by Mr. Besse and Moritz Heuser.

Over the past few years there has been a noticeable increase in the frequency of activist investors building up considerable stakes in German listed companies in the context of public takeovers. One reason for this development is what appears to be a new business model of hedge funds—the realization of profits through litigation after the completion of a takeover. To this end, the funds take advantage of minority shareholder rights granted under German stock corporation law in connection with certain corporate measures which are likely to be implemented for business integration purposes following a successful takeover.

…continue reading: Shareholder Activism in Germany

Activist Hedge Funds Find Ways to Profit from M&A Transactions

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday June 4, 2014 at 9:28 am
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Editor’s Note: The following post comes to us from Spencer D. Klein, partner in the Corporate Department and co-chair of the global Mergers & Acquisitions Group at Morrison & Foerster LLP, and is based on a Morrison & Foerster publication by Mr. Klein, Enrico Granata, and Isaac Young; the complete publication, including footnotes, is available here.

Activist hedge funds continue to find ways to use public M&A transactions as a tool to generate returns for their investors. As a result, market participants need to consider potential activist strategies in determining how to structure, announce and execute their deals.

Activists have used three principal strategies to extract additional value from public M&A transactions. The first strategy involves directly challenging the announced deal in an effort to extract a higher price, defeat the merger and/or pursue an alternative transaction or stand-alone strategy. The second strategy involves attempting to use statutory appraisal rights to create value for the activist. And the third strategy involves making an unsolicited offer to acquire a target, either independently or in conjunction with a strategic acquirer, to put the target in play. In this article, we discuss examples of recent uses of these strategies by activist investors and point out some general implications of these examples for transaction planners.

…continue reading: Activist Hedge Funds Find Ways to Profit from M&A Transactions

Communications Challenges of the Valeant/Pershing Square Bid for Allergan

Editor’s Note: Charles Nathan is partner and head of the Corporate Governance Practice at RLM Finsbury. This post is based on an RLM Finsbury commentary by Mr. Nathan.

The bid by Valeant and Pershing Square to acquire Allergan has made a very big splash in the M&A and corporate governance world. In brief, Pershing and Valeant have teamed up in a campaign to pressure Allergan to sell to Valeant in an unsolicited cash and stock deal. What distinguishes the Valeant/Pershing deal from a conventional public bear hug (such as Pfizer’s recent effort to acquire AstraZeneca) is that, by pre-arrangement, Pershing Square acquired a 9.7% equity stake in Allergan immediately prior to the first public announcement of Valeant’s bear hug. This unusual deal structure is a first and, if successful, may pioneer a new paradigm for unsolicited takeovers of public companies.

…continue reading: Communications Challenges of the Valeant/Pershing Square Bid for Allergan

The Activism of Carl Icahn and Bill Ackman

Editor’s Note: Matteo Tonello is managing director of corporate leadership at The Conference Board. This post relates to an issue of The Conference Board’s Director Notes series authored by Richard Lee and Jason D. Schloetzer, both of Georgetown University. The complete publication, including footnotes, is available here. Recent work from the Program on Corporate Governance about hedge fund activism includes The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon P. Brav, and Wei Jiang.

Activist hedge funds merit the attention of corporate directors, as the value of the assets under management increases and activist funds’ targets expand well beyond small capitalization companies. This post reviews the tactics used by two prominent activist hedge fund managers to create change in 13 companies in their portfolio and highlights four perceived governance failures at target companies that attracted activist funds’ attention. This post also includes a review of characteristics of activist hedge funds, the incentives their managers have to generate positive returns, and current research investigating whether and how hedge fund activism affects target companies.

…continue reading: The Activism of Carl Icahn and Bill Ackman

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