Each year, leading lawyers, bankers, PR professionals and other advisors focused on M&A and shareholder activism convene in New Orleans for the annual conference of the Tulane Corporate Law Institute to discuss the latest developments and trends transactions and corporate securities law. As regular attendees, we have seen the conversation evolve over time in a number of key areas affecting IR and PR practitioners. The following includes some of our takeaways from this year’s event.
The conference officially kicked off with Citigroup’s Co-Head of M&A, Mark Shafir, talking about “global M&A Deal-Making in Uncertain Times.” Shafir noted that although his clients are still interested in doing deals, M&A could be down by approximately 20% – 25% in 2019. Shafir also noted that activism is flourishing and will likely continue to be a dynamic space. M&A-related activism, particularly opposition to deals, has increased significantly at the start of 2019.
On a panel titled “ESG – Is It Here to Stay as a Shareholder Concern,” the Delaware Chief Justice Leo Strine and his predecessor Myron Steele agreed that ESG is not going away any time soon and that it is “here to stay.”
Additionally, Ted Yu, Chief of the Securities and Exchange Commission’s M&A office, echoed a message (later reiterated by Jay Clayton, Chairman of the Securities and Exchange Commission) that changes to 13D reporting rules are not imminent. However, Mr. Yu did note that there are some recurring issues related to 13D reporting, including the boilerplate language used in Item 4 disclosures. Further guidance on this issue is expected soon.
Over the years, this conference has primarily become known as a gathering place for all advisors in the shareholder activism space. Not surprisingly, the most heavily attended panels were entitled “M&A Media Issues – What Lawyers Should Know” and “The ‘Ins’ and ‘Outs’ of Dealing with Activists.” One of the major themes of the media panel centered on the growing universe of publications covering M&A, expanding coverage beyond that in traditional mainstream publications. The panel also noted that coverage regarding shareholder activism continues to grow. Other topics covered in this panel included the increasing prevalence of leaked deals, increased investment in digital media, and the evolution of ESG and passive investing in activism.
“The ‘Ins’ and ‘Outs’ of Dealing with Activists” panel included star-studded names such as Steve Wolosky, Co-Head of Olshan Frome Wolosky LLP’s Activist & Equity Investment Practice, and Joelle Frank, founder of the strategic communications firm bearing her name. This panel covered a wide array of topics ranging from how to counsel a “would-be” activist, how to advise a prospective target, and the importance of advanced preparation in an activist campaign.
During a private lunch ICR hosted with journalists, lawyers, bankers and proxy advisors, we identified four key takeaway themes:
- Advanced preparation is essential. Once it is determined that a client could potentially become an activist target, it is critical to prepare before the activist takes action. Once the client’s vulnerabilities are assessed, ensure that the company is engaging with its shareholders, communicating its message, and working with its advisors to take all necessary proactive measures.
- Passives are here to stay. The role that passive managers such as BlackRock, State Street, and Vanguard play in contentious situations is rapidly increasing. Ensuring that clients are in constant communication with these managers year-round is an easy and effective way to garner their support should an activist appear.
- Activism is evolving. In the past, the majority of activist campaigns were solely centered on gaining board seats in an effort to eventually sell all or part of company. While activists still frequently employ this tactic, other tactics have risen, including opposition to M&A deals and advocacy for strong governance and ESG practices.
- ESG is here to stay. Shareholders are increasingly demanding that companies be held accountable for their actions. ESG practices are continuing to strengthen, and will ultimately become embedded within every part of an organization.
Jake Noone is a Vice President in ICR’s Special Situations Group: Jake.Noone@icrinc.com
