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Latest version of activist defense playbook advocates paying advisors to negotiate appeasement


For the defense advisor's published views reported below, see

Note: The author also republished his views as April 30, 2015, Martin Lipton of Wachtell Lipton Rosen & Katz posting in The Harvard Law School Forum on Corporate Governance and Financial Regulation: "Some Lessons from DuPont-Trian".


Source: The Wall Street Journal | MoneyBeat, April 29, 2015 article



6:52 pm ET
Apr 29, 2015

Hedge Funds  

Lipton’s Latest on Activism: Maybe You Should Settle


By David Benoit

The dean of activist defense is warning companies that it might be be better to settle with activists than fight, given what’s going on at DuPont Co.

─ Reuters



In a memo to clients, influential Wall Street lawyer Martin Lipton said this week’s recommendation by proxy advisory firm Institutional Investor Services Inc. that Nelson Peltz should be voted onto DuPont’s board is another sign of the difficulty of companies winning fights.

Companies should give “careful consideration” to adopting activist ideas that “are not unreasonable” and putting a respected activist on the board in a settlement, along with agreements that tie the activists’ hands, Mr. Lipton wrote.

“In some cases even winning a drawn out proxy battle can be more damaging to a corporation than a reasonable settlement with acceptable board representation,” Mr. Lipton said.

Quiet settlements and constructive discussions are already becoming the norm in activist fights, but Mr. Lipton is viewed as the stalwart of those still fighting.

To many in the activists, the  decision to hire Mr. Lipton’s firm, Wachtell Lipton Rosen & Katz, is a signal that company is willing to duke it out. While Wachtell clients do sometimes settle, the firm has advised companies in several recent proxy fights that went all the way to a shareholder vote, including a high profile loss at Darden Restaurants Inc.

Mr. Lipton’s memo created a buzz Wednesday among bankers, lawyers and activists, who considered it a change of tone for Mr. Lipton.

Last year, Mr. Lipton got attention for allowing, somewhat begrudgingly, that there were activists he could respect. Now he’s taking a step further and suggesting companies actually listen to them.

Mr. Peltz and Trian are on that list. Mr. Lipton reiterated in the memo that they “have clearly established credibility and acceptability” and “have become respected members of the financial community.”

Wachtell last year advised more companies against activists than any other law firm, according to the WSJ-FactSet Activism Scorecard. The firm is not involved in DuPont, where Trian is attempting to get four board seats in a vote scheduled for May 13.

Still, the memo doesn’t go as far as to say DuPont should settle with Trian or that activists should all be heard. It doesn’t represent a repudiation of his career bashing activists, either.

Instead, the memo takes aim at ISS for flipping the calculus on activist fights against “generally well managed major corporations, even those with an outstanding CEO and board of directors.”

Mr. Lipton said ISS, through decisions like DuPont, has put the burden of proof on companies instead of activists. That makes it harder to win ISS’s recommendation and therefore harder to win the broader fight.

ISS in a statement said that it hasn’t changed its rules.“Per ISS’ longstanding policy, the burden remains on the dissident to make a compelling case for change,” said Chris Cernich, Managing Director and Head of Special Situations Research at ISS. “It has and continues to be the central question guiding our analyses and represents the first of two hurdles dissidents must surmount.”


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