Ready for battle
Chris Young spent the past six years advising institutional investors on how to vote in proxy fights and contested mergers. With his June 1 move from RiskMetrics Group Inc.'s Institutional Shareholder Services Inc. to Credit Suisse Securities LLC, the 42-year-old Young is now offering his insights on institutions to corporate clients.
"He knows how the institutions think about things, so he'll bring a different perspective than a lot of people in the room," says James Morphy, an M&A partner at Sullivan & Cromwell LLP.
Young is heading the takeover defense practice within Credit Suisse's M&A group, led by Boon Sim. In his time at ISS, Young says, "I sensed an incredible hunger from directors and managers for the unvarnished truth about how shareholders are looking at the world, because the last thing they want is to be blind-sided at the ballot box. In my view, there were a lot of situations that should have been resolved before going to a vote, and to the extent we can do that, I think it will be good for Credit Suisse clients and for shareholders as well."
Young was hired by ISS in 2004 to strengthen its analysis of contested situations. Initially focused on more traditional corporate governance concerns, the proxy advisory firm was pilloried in some quarters for lacking financial sophistication in its recommendation that shareholders approve the 2002 merger of Hewlett-Packard Co. and Compaq Computer Corp. Young offered ISS both legal and financial expertise. After graduating from Georgetown University in 1990 and Boston University Law School five years later, Young practiced at White & Case LLP before moving to Sullivan, where Morphy was one of the lawyers he worked for.
In 1998, Young jumped to Bear, Stearns & Co. as an investment banker focused on the technology sector. When the Internet bubble collapsed, Young says, he started looking at opportunities on the buy side. Martha Carter, the head of research at ISS, hired him as director of M&A and proxy research. He went on to build a team of several analysts devoted to contested situations and became a prominent figure in corporate governance.
"He elevated their profile on these matters," says Morphy. "I think he brought greater sophistication to the analysis. You might not always have agreed with him, but you could tell Chris knew what was going on."
Young cites Nelson Peltz's 2006 proxy fight at H.J. Heinz Co. as a bellwether battle. ISS recommended that shareholders vote for Peltz's slate of three directors, two of whom ended up winning election to the Heinz board. The next year, ISS supported the slate that U.K. activist the Children's Investment Fund Management (UK) LLP put up for election at CSX Corp., and they, too, won election. Both situations "were construed as evidence of our influence," Young says. His group also evaluated many of the large buyouts of the frothy period between 2005 and 2007 and in a few cases recommended shareholders reject deals because private equity shops were underpaying.
"I knew it was going to be a position where I could have an impact, but as far as the amount of the profile, that exceeded expectations," Young says. "It was a natural result of the increasing profile of ISS and a more contentious environment. Hedge funds took on bigger and bigger targets. There was an increased willingness of plain-vanilla investors to challenge transactions. All of that exploded in the six years I was at ISS."
Young will be a managing director at Credit Suisse and plans to hire a vice president, associate and an analyst. The new group will support CS bankers in proxy fights, hostile situations and corporate governance, Young says.
"My team will be able to bring the shareholder perspective so that directors and managers can make informed decisions," he adds. -- David Marcus