In IR Magazine's "Dealing with activist directors with an M&A agenda," Sullivan & Cromwell advocates preparing in advance for activist-designated directors with an M&A-related objective based on the firm's analysis of the significant number of companies that were sold or divested significant assets within a relatively short period of time after adding an activist director to their boards.
In that any company is vulnerable to activism and activist campaigns tend to unfold quickly, the firm suggests companies consider these actions (subject to tailoring to company-specific facts & circumstances) now before a relevant scenario manifests:
- Prepare for detailed information requests, including staffing, procedures for quality control, and safeguards regarding conflicts with other staff responsibilities.
- Require all materials be provided to directors in advance of meetings.
- Update board policies to ensure confidentiality and to establish guidelines for stakeholder communications about potential strategic activities.
- Open a channel of communication between the activist fund’s GC and the company’s GC to address other topics relating to board policies, securities filings, and insider trading policies.
- Prepare for the activist to take a fresh look at the company’s strategic plan and to challenge key assumptions underlying management’s financial projections.
- Conduct periodic training on recent developments in the application of fiduciary duties in the context of M&A activity.
See our recent report on Lazard's "2019 Review of Shareholder Activism"; our 2016 report: "Evaluating & Integrating Activist Directors" (in "Company News"); Wachtell Lipton's "Dealing with Activist Directors on the Board"; and additional information & resources on our Shareholder Activism and Director Duties & Liabilities pages, and our Data Privacy page under Board/Director Communications. This post first appeared in the weekly Society Alert!