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Skadden Arps’ recently released article: “Should Boards Be Wary of Informal Settlements With Shareholder Activists?” explores how informal settlements differ from formal agreements and discusses factors that may influence whether companies and activists pursue an informal resolution. The memo highlights considerations such as alignment on strategic priorities, trust in the activist’s commitments, efficiency and cost, and the parties’ prior engagement history, and references recent examples involving two prominent companies.
The firm also advises that informal settlements tend to be most effective where boards and management teams have undertaken proactive preparedness efforts—including shareholder engagement and strategic self-assessment—positioning the company to evaluate activist demands and determine whether to pursue an informal or formal approach.
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