2015 is the year of the kinder, gentler activist investor.
Wall Street’s tough guys are softening their language and dialling down the rhetoric in attack as they look to take on bigger targets.
It’s a stark contrast to a decade ago, when investors like Dan Loeb rained fire upon corporate boards in the form of aggressive filings, letters and TV appearances.
“Dan Loeb toned his language down much more than what it used to be,” said Steve Wolosky, a partner with law firm Olshan Wolosky Frome.
“Instead of being a tough guy, it’s ‘this person has been on the board too long,’ or ‘the company has suffered in performance.'”
This is the same Dan Loeb who, back when activists were relegated to taking on smaller targets thanks to their comparably smaller firepower, verbally abused corporate executives with a tone typically reserved for reality shows.
In 2006, when trashing the son of InterCept CEO John Collins, Loeb asked: “I was not sure whether it was his relation with his father-in-law or the $US238,776 salary that affords him the opportunity to work on his golf game during business hours.”
And he labelled Star Gas CEO Ira P. Sevin “one of the most dangerous and incompetent executives in America,” saying “it seems that Star Gas can only serve as your personal ‘honey pot’ from which to extract salary for yourself and family members.”
But those days are gone, because the industry is growing up and, growing bigger.
As investors gather assets, they are taking on bigger targets. Their ability to bully those targets is much reduced versus, say, a mid-sized corporation, and so they depend on the support of other shareholders.
“Unlike the early days of activism where activists were targeting mid-sized company, they now have a smaller percentage of the vote, which is the stick they wield, and so they need to cultivate the support of the regular long only funds,” said Chris Young, head of contested situations in the M&A Group at Credit Suisse.
Activists are also addressing an oft-cited criticism that they don’t have the long-term interests of the company in mind. To that end, they are sharing their due diligence and setting up websites to show fund managers at other funds that their investment thesis isn’t a short-term play.
“They are getting the lingo down right,” said Young. “They are trying to cast their campaigns as good for the long term.”
There is also something to be said for the age-old axiom of ‘catching more flies with honey than vinegar’, according to Wolosky.
“You will get further with institutions if you focus on poor decisions by a director rather than personal attack.”
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