TECHNOLOGY SECTOR BEWARE: THERE’S A BULLSEYE ON YOUR BACK

 

Boardroom

It’s fair to say that Starboard Value LP made Yahoo! Inc. CEO Marissa Mayer’s life difficult. The shareholder activist, unhappy with Mayer’s failure to turn the struggling company around, threatened to replace all of the company’s board of directors earlier this year.

Mayer managed to avert a proxy fight by ceding several board seats to Starboard, including one for fund CEO Jeffrey Smith.

While Starboard was turning the screws on Yahoo, it also was ratcheting up the pressure on Marvell Technology Group Ltd. Marvell similarly caved in to the fund’s demands to reconstitute its board.

Other technology companies should pay attention—while the number of activist campaigns may have dropped off from 2014’s peak, the technology sector will remain the top target for shareholder activists.

The industry has long been their favorite. According to Bloomberg data, from 2010 to August 2016, 117 technology companies were targeted by activists, compared to 80 companies in the second-most targeted industry—consumer discretionary, which includes restaurants and department stores.

And there are reasons why activists pick on tech companies, lawyers told Bloomberg BNA. One is that many are led by creative technologists, brilliant at product development but perhaps not as savvy at running publicly traded companies.

Meanwhile, shareholder activists continue to increase their holdings in the technology sector. Elliott Management Corp., for example, recently disclosed that it increased its stakes in several security technology companies, including Qualys Inc., Fortinet Inc. and CyberArk Software Ltd.

Just so you know, the $27 billion hedge fund led by Paul Singer was ranked the most influential activist fund in 2015 by Activist Investing Annual Review 2016. Last year, the fund pushed EMC to be acquired by Dell, in the largest tech takeover ever.

Just so you know.