This high-tech company found itself in the crosshairs of an activist hedge fund with a long history of taking positions in companies and then capturing board positions and unseating top management. The hedge fund fired the first salvo by upping its ownership and issuing a scathing press release criticizing management and the board. Neither the CEO nor his team had experience with such contests.
While the hedge fund’s criticisms were unfounded, the constant barrage of SEC filings and press releases had greatly distracted management. As new investors with significant positions – also from hedge funds – surfaced and joined in the attacks, pressure mounted on the CEO from the board to devise a response strategy. He needed to demonstrate to stakeholders that his stewardship was in their best interests. Uncertainty about how to respond led mostly to silence, which confused employees and investors.
Montieth & Company devised a response strategy to the three most likely scenarios in which the contest would unfold. This provided the CEO and his team a conceptual “playing field” for considering their options and taking action. Central to the strategy was for the company to be more aggressive and explicit in its objections to the hedge fund’s criticisms – an approach designed to protect the company’s stature and standing with stakeholders.
We presented the strategy to the board and enlisted their input and support. The company’s actions helped win stakeholder support for the eventual decision to sell out to a strategic buyer for a sizable premium.