Boards and management all have the same fear – the ominous news story, 13D filing, or even the first phone call when an activist investor introduces themselves as one of their largest shareholders. What happens next is swift and often sets the tone for the engagement. The Board is notified, advisors are summoned, and a defense plan is assembled. Directors are flooded with counsel from advisors who claim they know the activist best and have seen this situation many times before.
In these moments, it’s easy for Boards to slip into self-preservation mode and engage in standard defensive tactics. However, many of these well-advised tactics may jeopardize trust with the activist and ultimately reduce the company’s negotiating leverage. Rather than establishing the basis for a thoughtful exchange of ideas, some standard defense tactics can inadvertently signal resistance and bad intentions, making it more difficult to maintain a constructive dialogue that could lead to a mutually beneficial outcome.
Here we examine Ten Tactics that Unnecessarily Frustrate Activists and their influence on the negotiating process to better inform companies and boards about how their actions may be perceived by the other side and may have unintended consequences.
