Senior M&A Attorney Puts Corporations On Notice: ‘Any Company Is A Potential Target’

By |
0 Comment
These pages have frequently highlighted the many victories notched by activists pushing for breakups. We are big, big fans of those guys. Of course, like all good battles, the other side doesn’t just sit back and wait to be ambushed. No, new tactics are drawn up, plans laid and in this case that means talking to lawyers. About a year ago, Marty Lipton, name partner at Wachtell Lipton, shared some of his defensive thoughts in a letter. Now the WSJ Moneybeat blog recently sat down for an interview with Richard Grossman, an M&A partner at mega firm Skadden Arps, in order to discuss ‘the environment, trends and the advice he gives clients when an Ackman or Elliott show up’.

While it’s worth reading the edited transcript linked to above, more generally, it seems that companies are becoming increasingly aware of activists and are preparing in advance for possible encounters. One of the reasons is that large shareholders are more open to activists these days possibly because activist investors themselves have changed. Activists are more sophisticated and better equipped for these fights than they have been in the past and this Dealbook post notes that they aren’t perceived as short-term holders (this piece is worth exploring in more detail) anymore.

Mr. Grossman also notes that the battlefield seems to have shifted from the courtroom to the media and as a result, he suggests that companies should be engaging their largest shareholders more regularly. Finally, in what seems like pretty obvious advice, he notes that companies should be thinking about their operations or cash balances more strategically before activists come knocking on their doors. Mr. Grossman’s comments about the media ring true. Bill Ackman has become a quasi-celebrity for his investments (people are now speculating about his next target) and the recent Jana/Agrium (AGU) battle was an ugly PR scrum.

Overall, this should be a net positive for investors. The best defense against activists is for the companies themselves to be thinking more strategically about their assets and operations and hopefully, the threat of activists will make that happen. Of course, it could also lead to the engagement of lawyers earlier on and the passing of poison pills and the like which would be big negatives. It will be interesting to see how this war evolves.

Disclosure: Author holds no position in any stock mentioned.

Related articles