RC: To what extent has shareholder activism become part and parcel of corporate life? How important is it for companies and their boards to take a proactive approach to activist strategies?

Katz: Shareholder activism has become ingrained in corporate America as shareholder activists are targeting both large and small public companies. Size and performance are no longer barriers to shareholder activism as activists have tremendous amounts of capital to deploy and are not afraid to target well-performing companies with strategies designed to enhance shareholder value in the short-term. In light of this new reality, public companies need to be proactive so that management teams and boards of directors are not caught off guard. Activists that can surprise companies may be better positioned to create a split between management and the board that can be used to the activist’s advantage. Once management has lost support of the board, change is often inevitable.

Klein: There is no question that stockholder activism has become a fully embedded aspect of corporate life in the US. All public companies, large and small, have to anticipate that they could become a target of stockholder activists and plan accordingly. Although the growth has slowed of assets under management by activist funds, they still have over $120bn to invest. Companies as large as General Electric, Pepsico, DuPont and Microsoft have all been the target of activists in recent years, so virtually no company can view itself as immune from an approach by a stockholder activist fund. Therefore, a company and its board must be proactive in undergoing a regular, periodic self-examination of its potential weaknesses – weaknesses that might attract the attention of activists. At the same time, a company must regularly engage its major shareholders to understand how their shareholders are viewing the efforts and results of the company and its management.

Apr-Jun 2017 Issue

Innisfree M&A Incorporated

Simpson Thacher & Bartlett LLP

The Hershey Company

Wachtell, Lipton, Rosen & Katz