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.