Dealpolitik: Four M&A Lessons from 2014

1. Activists: When you can’t beat ‘em, have them join you.

Only a few years ago, the standard advice to directors when activists surfaced was to tighten up a company’s takeover defenses, court big shareholders for support, and not let the activist nose in under the tent. Activists sometimes had trouble getting their calls returned.

The change in tactics is less about how management and incumbent boards view activists than acceptance of the realities of the situation. The types of moves activists press for — spinoffs, asset or company sales or leveraging the company — aren’t going to become management favorites any time soon, at least when being pushed by an outsider.

Even with minority board representation, activists can press their agenda, which management might view as short-term gain at the expense of long-term objectives. That consumes director bandwidth and management time and can divert management from pursuit of its own strategy. If an activist does propose a good idea, most boards are pretty confident they can implement it without bringing in noisy new directors.

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