Activism isn’t only alive and well – it’s taking new forms that will impact the entire ecosystem, from proxy advisors to bankers to companies themselves. To discuss the market landscape, CorpGov and The Palm Beach Hedge Fund Association hosted the 2022 Winter Activism Forum on Feb. 16 featuring leading market participants and advisors who have consulted on board intelligence and the most prominent activism campaigns in recent years. The panel discussed the 2022 proxy season, ESG-based activism, proxy advisor considerations, “SPAC-tivism” and more with data from AI-enabled research platform Sentieo. The live event featured speakers from Jefferies Financial Group Inc., Glass Lewis, Vinson & Elkins, ICR, Longacre Square Partners, Morrow Sodali, and Legion Partners, running approximately 90 minutes including a live Q&A session with the audience.
CLICK HERE TO WATCH THE FULL REPLAY ON DEMAND or watch highlight videos with each panelist below:
Dan Zacchei, Managing Partner, Longacre Square Partners, gives an overview of the “incredibly robust” proxy season so far in 2022. Not only are we seeing activists trying to break up deals, but also campaigns seeking to put companies in play, creating a feedback loop between M&A and activism, he explains.
Phil Denning, Partner, Co-Head of Special Situations, ICR, explains how activism is increasingly part of the conversation with his roster of publicly-treaded clients. Telling the “better story” and thinking deeply about the business case and value case are as crucial as ever. “We are saying to management teams, ‘you’re publicly traded and need to be thinking about your vulnerabilities,'” he says.
Lyndon Park, Partner, Head of Governance Solutions, ICR, explains how ESG concerns are catalyzing massive capital allocation, expected to influence one third of global AUM by 2025. He emphasizes that newly-public companies have been quick to brush up on ESG reporting given the tremendous interest from investors. “In this environment, ESG absolutely drives the money and companies will follow the money so they’re getting hip to it much earlier now,” he says, adding that public boards need to accept the continued blurring of ESG funds and regular funds.
Activist investor Ted White, Managing Director, Legion Partners Asset Management LLC, discusses how years-long engagements with companies that center on cultural nuances can quickly morph into entirely different affairs once a proxy fight begins. “It turns into a little bit like politics and a battle of news snippets,” he says, adding that the details of those highly-public discussions are really only a small percentage of what needs to be addressed.
Mark Grothe, Senior Research Analyst, M&A and Contested Situations, Glass Lewis, a leading proxy advisor that gives investors recommendation on key shareholder votes, discusses how his firm’s default approach is generally to support SPAC mergers (while still voicing concerns over anything from valuation to governance). He points out that the share price of a SPAC before a deal closes may not reflect the true value of the business. “There’s a lot of trading in and out, there’s a lot of share turnover before that de-SPAC transaction hits and I think you really get away from the fundamental value being reflected,” he says.
Chris Young, Managing Director and Global Head of Contested Situations, Jefferies Financial Group Inc., points out that it’s very easy to come up with justifications for short-term underperformance, which has led the financial community to look at 1-, 3- and 5-year returns as a standard. He added that longer-term results become the focus “especially with people like Joele Frank and others who know how to spin this thing that this was all temporary…and we’re a newborn baby in the public markets.”
Michael Verrechia, Managing Director, M&A and Activism Advisory Group, Morrow Sodali, explains how many companies with significant retail shareholder populations don’t do enough to engage with these investors. In his experience of more-than 20 years, he has observed companies cut down on communications with retail shareholders as a cost savings measure. “If you’re a retail shareholder with a significant investment, you may not move the needle share wise by yourself but you still have a significant investment in the company and you don’t want to feel neglected,” he adds.
Panelists:
- Lawrence Elbaum – Partner and Co-Head of Shareholder Activism, Vinson & Elkins
- Dan Zacchei – Managing Partner, Longacre Square Partners
- Mark Grothe – Senior Research Analyst, M&A and Contested Situations, Glass Lewis
- Michael Verrechia – Managing Director, M&A and Activism Advisory Group, Morrow Sodali
- Phil Denning – Partner, Co-Head of Special Situations, ICR
- Lyndon Park – Partner, Head of Governance Solutions, ICR
- Chris Young – Managing Director and Global Head of Contested Situations, Jefferies Financial Group Inc.
- Ted White – Managing Director, Legion Partners Asset Management LLC
- John Jannarone – Editor-in-Chief, CorpGov (Moderator)
- Jarrett Banks – Editor-at-Large, CorpGov (Moderator)
Topics included:
- Activism in turbulent markets
- ESG-based activism
- M&A-driven campaigns
- “SPAC-tivism”
- Proxy advisor considerations
- Corporate preparedness
- COVID-19 concerns in 2022 and beyond
Contact:
www.CorpGov.com
Editor@CorpGov.com
Twitter: @CorpGovernor
