Shareholder-Contested M&A

Contested elections, particularly mergers, are inherently votes of no-confidence in a Board and management team.

The winning strategy for any company is to focus on the 9 out of 10 shares not held by the activist. The least risky option for those shareholders – and the least risky recommendation for ISS or Glass Lewis, to whom the shareholders often look for advice – is to support a transaction which demonstrates informed, thoughtful, comprehensive, and effective Board oversight.

An activist is effective to the extent they can undermine that confidence, focusing attention on certain facts and spinning narratives which call the Board’s oversight into question. A company is least effective when it focuses solely on reiterating the known facts. The only fact that would be determinative, the quality of the post-merger execution, is unavailable at the time of the shareholder vote:  shareholders’ only choice is whether to take a leap of faith in the Board and management team which have proposed the transaction.

SGA can:

• Marshall the facts, terms, and strategy into a narrative which will build confidence in the Board, among the proxy advisors and among the institutional holders who have not yet formed their opinions, and de-risk their support for the transaction.
  • This is particularly true of the “ISS deck” which will become the centerpiece of the proxy advisor meetings (and, done properly, will be injected directly into the bloodstream of the proxy advisor reports).
• Prepare executives and directors for their proxy advisor engagement meetings, including providing insights, extensive coaching, and “live fire” rehearsals with our Managing Partner, ISS’ former Head of M&A and Proxy Contest Research.
• Help the Company mitigate any critical commentary in the proxy advisor reports, particularly with regard to any questions about the Board’s comprehensiveness and stewardship, to reduce the frictional costs of getting shareholders to yes.
• Identify and help the Company take advantage of existing fault lines in the shareholder base which result in divergent shareholder interests, and can help drive the right outcome at the polls.
• Help the Company prepare for engagements with institutional holders by providing actionable, investor-specific insights