What Should Your Company Be Doing To Prepare For, And Ideally To Avert, Activist Knocks On Their Doors?
A Checklist Of Our Top-Ten Tips On Things To Do... ASAP
If your company is not comfortably in the top quartile on most preformance measures, jumpstart your engines immediately: Recognize that this is a serious problem in itself these days, regardless of your market cap or prominence, or of any plans you might be “hatching.” It’s a problem that requires an aggressive acton plan - and a greatly stepped-up communications plan ... without delay.
- Ironically, if your company is doing very well - say with a big stockpile of cash, a high stock price and a low debt-to-equity ration - you need to prepare for activists to knock too - and to knock harder than ever in today’s go-go environment.
- If you are vulnerable on points one or two, get professional help immediately - from a market-savvy investment bank you can trust to be brutally rigorous... and brutally frank... from a top-flight investor communications advisor and message-crafter... and from a top- flight proxy advisor.
- Get your board on board and involved... immediately.
- Step up your your communications efforts.... without delay... to make sure that you - and your board – are aware of and “on the case” of any and all performance issues, your company’s long and short-term capital allocation plans, and alternatives ... and the overriding importance of having robust, long-term strategic plans in place: “ramped-up MD&A” on capital allocation philosophies, plans and results need to become much more of a daily exercise than an annual one, we advise.
- Conduct a top-to-bottom analysis of your entire investor base - including the number and percentage of shares held by each significant investor, and investor segment ... but remembering all the while that things can and will change overnight - and usually not in your favor - if activists knock.
- Quickly identify the governance hot-buttons of each significant investor and investor segment: identify any “gaps” that activists might seize upon - and do a rigorous pro-forma analysis of likely support for pro-management positions - should that knock on the door come tomorrow.
- Take immediate action to be proactive about “good governance” measures: if you still have plurality voting, a staggered board, or poison pills, consider “making nice” and introducing your own proposals on some or all of these fronts before the door-knockers knock, to minimize your vulnerabilities.
- Have the board take an especially hard look at itself: a really strong board is one of your strongest bulwarks against activist “knocks” of any and all kinds. Weak board diversity - whether in terms of gender, age, ethnicity or industry experience - or too many members who might seem ‘over-boarded’ or with ‘over- long tenure’ can become major strategic and tactical weakness in a fight to exert control over your company’s future.
- Reach out personally to all your larger investors... without delay... to make sure that they are aware of your heightened awareness of potential governance “issues” ... and your willingness to listen to any and all concerns.
- Be sure to do all this before anyone knocks on your door to demand change. Don’t expect investors to take your call if they haven’t heard from you before.