Hedge Funds |
Tulane Business Forum
A Boom Now, but Hurdles
Ahead for Activist Investors
MICHAEL J. DE LA MERCED
2014, 6:27 am
NEW ORLEANS — It’s a
great time to be an activist, but there are signs that things will
get a little bumpier.
At the Tulane Corporate Law
Institute here, that was the viewpoint of advisers to both hedge funds and
to the companies they seek to shake up.
For now, activists are doing
well, members of a panel discussion on the topic agreed. Nearly two-thirds
of proxy fights are settled, with hedge funds getting at least a seat on
Why? In part because they have
such strong support from other investors. Victor Lewkow, a partner at Cleary
Gottlieb Steen & Hamilton, cited a recent article in
noting that institutional investors feel more emboldened not
only in supporting activists, but also in sometimes giving them tips.
“It’s unfortunate, but if you
look at shareholders lists, there’s no one there you can count on,” said
Daniel Burch, the chief executive of the proxy solicitor MacKenzie Partners.
“You may be starting at 30 percent against you and you don’t have anyone on
And Joele Frank, the founder of
the public relations firm Joele Frank, Wilkinson, Brimmer, Katcher, added:
“We used to have a 50-50 shot of winning. Until this year.”
Such is the state of activist
confidence that many are now seeking majority control of a board, rather
than seeking a “short slate” of a few directors.
But there were also some notes
of caution, including from an adviser to activists. As activism’s popularity
has grown, so have the number of new entrants into the field, many who
aren’t as talented as proven winners like Carl C. Icahn or William A. Ackman.
“A lot of people coming to this
space where I question their skills,” said Steve Wolosky, a partner at
Olshan Frome Wolosky and a frequent adviser to activists. “I do have concern
about less-than-intelligent activists.”
And much of what dissident
investors have demanded in recent years — returning cash to investors
through dividends or buybacks — has already been done. “Balance sheet
activism” will always be around, the panelists said, but hedge funds are
turning to operational activism, a more difficult task.
Coupled with the growth in
activist funds, there may be fewer opportunities for those who fancy
themselves the next Daniel S. Loeb.
The New York Times Company