Activist fund managers are launching more insurgency campaigns than ever, despite the diminished M&A market. During The Deal's M&A Outlook 2009 conference Tuesday, several panelists discussed how the current economic environment might alter activist investors' strategies.
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Rachel Posner, senior managing director and general counsel for
Georgeson Inc., said shareholder activism is growing under economic
conditions. She explained that that there were 70 proxy fights in 2008
and the majority of them are with hedge funds. Executive compensation
is one of the highest reasons for activism, Posner explained. "Fifty of
those were related to the election of alternate directors of
management. Twelve of them were actually settled. Thirty-nine percent
dealt with executive compensation, salary and golden parachutes," she
said.
Matthew Sherman, a partner at Joele Frank, Wilkenson Brimmer Katcher,
said he believes the economy has allowed activism to mature, but the
fundamental of activism is the same. Because activist shareholders tend
to invest in underperforming companies that are not proactive, and
since the credit market is tightening up, many activists' arguments are
being validated. "I think when activism started to grow up a couple
years ago the economy was strong and hedge funds challenged boards to
put the company up for sale, to sell company assets or for returns for
capital. The way the credit market is tightening, a lot of hedge funds
are modifying their arguments and using more governance," he said.
Still, Sherman added that no one is feeling comfortable in the current
economic environment. In the last year, activism has been heavy in the
retail and restaurant industry. "Hedge funds and activists are looking
to better position themselves when the market recovers, and companies
are very mindful of when activist campaign companies are pursuing them.
These companies are very vulnerable now and aware of it," he added. -
Maria WoehrSee all M&A Outlook 2009 posts
