Activists Eyeing Special Meetings, Written Consent in 2016

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By Michael Greene

March 25 — After a record-breaking year, two new battle fronts—whether shareholders have the right to call a special meeting and to act by written consent—could create even more opportunities for activists this year.

This is even as corporate takeover defense mechanisms—such as poison pills and staggered boards—continue to be chipped away, Kai Haakon E. Liekefett, head of Vinson & Elkins LLP's shareholder activism response team, told Bloomberg BNA in a March 24 interview.

Activist are in favor of these rights because they enable them to put pressure on the company all year long, Liekefett said.

Typically, activist investors can only go after a company at the annual meeting when they launch a proxy contest. However, if a company’s charter and bylaws allow a shareholder to call a special meeting or to act by written consent, an activist can essentially attack a company 365 days a year, he said.

Activists this year also are going to hone in on certain industries, observers said, pointing to real estate and finance as two sectors where this trend is emerging.

All At Risk

There were more than 500 shareholder activist campaigns worldwide in 2015, with Elliot Management—Paul Singer's $27 billion hedge fund—leading the pack . The targeted companies have ranged in size, including behemoths such as Apple, Microsoft Corp., DuPont Co. and American International Group. Strong corporate performance also no longer provides immunity from activist interest.

The pace hasn't let up this year. Among other high-profile fights, hedge fund Starboard Value LP has announced its intent to unseat Yahoo! Inc.'s entire board .

In 2016, industry-specific activism is likely to increase. “That is something we are expecting,” Liekefett said. “We are going to see over time that activists are just going to pick their industry.”

While most activists are generalists that invest across a significant number of industries, there already are a number of activists that specialize in certain industries, Liekefett said. There also are activists that specialize exclusively in two or three industries, he said.

Another reason for specialization is that the industry expertise that private equity firms brought to their investment decisions a decade ago is now being brought back “into the fold,” said Avinash Mehrotra, co-head of Goldman, Sachs & Co.'s M&A Shareholder Advisory Group, speaking March 18 at Tulane University's Corporate Law Institute in New Orleans.

Emerging Trends

Meanwhile, according to panelists at the Tulane event, other emerging themes include:

  • activists are launching campaigns with little or no notice to companies;
  • there are more “wolf pack” attacks, where groups of shareholders with relatively small stakes work together to target a company;
  • activists with small stakes in large companies can leverage the support of large institutional investors to effectively target the companies; and
  • activists are focusing on directors with long tenure.

    One favorite strategy of the hedge funds is to embarrass corporate management, in the process dividing the company and its shareholders.

    In this environment, it is critical that companies keep one step ahead. According to the Tulane panel, this includes looking at your business the way a short-term financial investor would during times of peace, before an activist strikes.

    Companies also should:

  • track peer performance and activist involvement among their peers or similar industries;
  • have a well-defined business strategy that is fully supported by the directors;
  • engage and build credibility with shareholders;
  • monitor media relationships; and
  • cultivate third-party supporters, such as the proxy advisory firms or trade associations.

    In the age of the “engaged shareholder,” it is simply the “new normal” that management must discuss, and defend, their business and strategy with shareholders, Mehrotra said at the Tulane conference. Going forward, activists will continue expanding their mandate, and their strategies are going to get more fluid, more diversified and more pervasive, he said.

    The better management teams have absorbed this concept and are not alarmed when activists start prowling around their stocks, Mehrotra said. “It's just part of being a public company today.”

    To contact the reporter on this story: Michael Greene in Washington at

    To contact the editor responsible for this story: Yin Wilczek at