Actionable Ideas for Companies and Sponsors
While Activism Will Decline In The Near-Term, Companies Should Prepare For The Next Wave
We expect the number of activism campaigns to decline in the near term, given record level market volatility historically has served as a deterrent to new activist campaigns. However, given the large amount of capital allocated to activist funds, we believe that once market volatility levels decline, we will see a robust return to historical activity levels and to a large universe of activist targets, given some companies will rebound slower than others.
While the critical near-term priority for all companies is to get their businesses returning to normal operating levels, advanced preparation for activism should also be a priority in order to mitigate the tactical advantages activists possess in this market environment. While there are many components to defense preparedness, some near-term key action steps should include (i) achieving alignment among Board members regarding a collective view on the company’s intrinsic value, and (ii) the adoption of an ISS-friendly short duration poison pill, or putting such a pill “on the shelf” for rapid adoption if a threat is perceived. Several companies have adopted such pills over the past several weeks in response to their share price declines.