Wachtell Lipton Discusses the State of Play in Activism | CLS Blue Sky Blog

The most powerful law firm representing corporate management gives their perspective (sometimes self-serving as exaggerating threats leads to higher fees) on the challenges/threats faced by corporate insiders:

The threat of activism remains high, and has become increasingly global.

Activist assets under management remain at elevated levels, encouraging continued attacks on many large successful companies in the U.S. and abroad.

In the current robust M&A environment, deal-related activism is prevalent, with activists instigating deal activity, challenging announced transactions (g., the “bumpitrage” strategy of pressing for a price increase) and/or pressuring the target into a merger or a private equity deal with the activist itself.

“Short” activists, who seek to profit from a decline in the target’s market value, are increasingly aggressive in both the equity and corporate debt markets.

Activists continue to garner extensive coverage in both the business and broader press, including a lengthy profile of Paul Singer and Elliott Management in an August New Yorker article, “Paul Singer, Doomsday Investor”. “Singer has excelled in this field in part because of a canny ability to discern his opponents’ weaknesses and a seeming imperviousness to public disapproval.

”Momentum for enhanced ESG disclosures is growing. The Coalition for Inclusive Capitalism continues to study ways to measure long-term sustainable value creation that will demonstrate the value companies create beyond financial results.  Embankment Project for Inclusive Capitalism.  And earlier this month, two prominent business law professors, supported by investors and other entities with over $5 trillion in assets under management, filed a petition for rulemaking calling for the SEC to “develop a comprehensive framework requiring issuers to disclose identified environmental, social, and governance (ESG) aspects of each public-reporting company’s operations.”In turn, activists have sought to enhance their profile among governance professionals, passive institutional investors and ESG-oriented investors, g., JANA Partners’ “impact investing” fund which has partnered with CalSTRS to request that Apple address overuse of its devices among youth, and Elliott Management’s “Head of Investment Stewardship” position, highlighted in an October 8, 2018 Wall Street Journal article.

An important new study by Ed deHaan, David Larcker and Charles McClure, Long-Term Economic Consequences of Hedge Fund Activist Interventions, has found that on a value weighted basis, long-term returns are “insignificantly different from zero.”Gender diversity has become an increasingly prominent focus in the corporate governance conversation, with California recently becoming the first state to enact legislation instituting gender quotas for boards of directors of public companies headquartered in the state. In the current climate, it is prudent for public companies to work toward developing policies to promote equality in the workplace and ensure appropriate disclosure and shareholder engagement in that regard.

Source: Wachtell Lipton Discusses the State of Play in Activism | CLS Blue Sky Blog

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