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Activist Investing Today: William Blair’s Bresani on Bad Deals, M&A Crumbs

Published: September 19th, 2023
The head of corporate advisory at the investment bank explains why sometimes advisers need to tell the emperor they don’t have any clothes, when it comes to dealmaking, and in other cases to 'drop the crumbs' before the deal.

Sometimes companies considering large transformative acquisitions need to be told not to move forward with the deal — it could be perceived poorly by investors and possibly attract an activist investor eager to shake up the board and C-suite.

That’s the view of William Blair & Co. LLC managing director and head of corporate advisory Christina Bresani, who recently appeared on The Deal’s Activist Investing Today podcast. Some deals may be perceived poorly, she said, while others could come out OK if companies stress test deals before they are announced as well as drop “crumbs” to investors in advance of completing a large transaction.

Companies need to have a good internal process to review a prospective deal to understand how the market will perceive it before it is announced. “You want to make sure that you have a board that is going to ask the right questions and not just, ‘CEO, we will do whatever you want,’” she added.

And in some cases, Bresani said, advisers must tell executives that a deal doesn’t make sense. “One of our jobs as their adviser is to tell the emperor that they don’t have any clothes when they don’t. … Other times we will say, ‘Now’s the time to do it. Go for it.’”

In other cases, conglomerates need to evaluate whether the market, and company analysts, are properly evaluating all the divisions — and if not, perhaps divestitures are in order or an activist could show up, she said.

If shareholders and the research community don’t understand all the pieces, and don’t value them, that should raise a red flag. Another issue: Are all the different divisions that make up the conglomerate No. 1 or 2 in their respective industries? “Are you No. 15 in one [industry], and what would it take to get from 15 to top three? How much investment would that take? How long would that take, and could your capital be deployed better elsewhere,” she added.

Companies need to be their own activist, though sometimes activists agitating for M&A don’t know the full picture.

“In one situation, I was working with a client and an activist approached them, to either sell the entire company or divest some assets, and little did the activist know that we had already run a process and there were no takers for the parts or the whole,” Bresani said. “Sometimes you’re out in front of it, and there’s a very good reason for not doing it.’”

Here’s the full podcast with Christina Bresani:

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