Activists are prepared for battle. They are armed with innovative business plans containing a mixture of investment banking style analysis, strategy consulting and financial restructuring business plans that are comparable to the top consulting and “bulge bracket” investment banking firms. Activists also maintain a massive cash war chest climbing into the tens of billions along with a who’s who database of institutional investors that are more than happy to lend their proxy vote to assist activists in unlocking shareholder value.
Mounting a defense to fight off an activist can be extremely expensive in both time and cost. A defense strategy can quickly run into the millions because it requires the hiring of investment bankers, accountants, attorneys and public relations gurus. Collateral damage from a public fight not only is costly, but also exposes the firm’s weakness to competitors, shareholders, customers and business partners.
Here are 3 things a CEO can do to avoid or preempt an activist attack.
1. Eliminate financial and operational underperformance. Activists are attracted to firms that demonstrate fundamental underperformance when compared to industry peers. These include firms experiencing growing negative margin gaps, sluggish revenue and increasing sales but at a decreasing rate. Additionally, other key performance indicators include poor returns on assets, equity and employee performance, as well as those that have sub-optimal real estate assets. Starboard is currently after Macy’s to spin off its real estate. Tech savvy activists are increasingly launching attacks on companies that maintain outdated technology and marketing capabilities and are ill equipped to compete in today’s hyper competitive digital eCosystem. A company experiencing financial and/or operational underperformance versus its peers is more than likely already on an activist watch list.
2. Conduct a regular vulnerability audit. Avoid the cross hairs of an activist by not being undervalued and underperforming. A preemptive activist audit is essential to gauging your firm’s vulnerability to an activist investor. The audit will provide management with a deep understanding of the value-creating proposals that an activist is likely to present. Create an internal value-creating turnaround plan when no one is watching and without the cost and distraction of an activist campaign. A strategic communication plan exposed to the investment community will erode the attractiveness, thus reducing the activist viability of a large payout. In the event that an activist campaign is launched, management will then have a plan that can lead to a fast track of compromise and collaboration.
Ask the following questions:
3. Create an aggressive turnaround plan and communicate your strategy to stakeholders.
Prepare a shareholder outreach strategy. Highlight weaknesses, while providing a clear roadmap designed to mitigate underperformance and aggressively unlock shareholder value. The plan should include any new members or advisors to the management team, as well as plans for reducing cost, improving profitability and/or spinning off unproductive operations. A well-designed value creation plan will help ward off potential activists.
Having an activist prevention strategy provides management with an activist’s perspective regarding creating shareholder value. Executing a review gives management the ability to reverse poor performance on their terms, as well as avoid a potential conflict with a heavy-handed activist.
Chief Executive Group exists to improve the performance of U.S. CEOs, senior executives and public-company directors, helping you grow your companies, build your communities and strengthen society. Learn more at chiefexecutivegroup.com.
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1:00 - 5:00 pm
Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process
Executives expressed frustration with their current strategic planning process. Issues include:
Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns. They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning. Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process. This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented. If you are ready for a Strategic Planning tune-up, select this workshop in your registration form. The additional fee of $695 will be added to your total.
2:00 - 5:00 pm
Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations.
Limited space available.
10:30 - 5:00 pm
General’s Retreat at Hermitage Golf Course
Sponsored by UBS
General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.
The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.
