How institutional investors have come to recognize the value of activist investing

Eric Rosenfeld is the founder of activist investing firm Crescendo Partners, a New York-based firm formed in 1998. In this Opalesque.TV video interview Eric discusses what characterizes his strategy, where he tries to close the value gap of undervalued companies by obtaining board representation and then addressing from within a company’s limitations or inefficiencies in management, operations, or specific divisions.

Since foundation, Crescendo has successfully gotten representation on 20 boards and has been effective in increasing value for shareholders, a factor that has made it easier for the firm to join boards and gain stockholder support. Among other factors, Rosenfeld says a key metric in viewing potential stock value is the enterprise value to free cash flow, and he describes the firm’s idea generation process, which come from various sources, including the 200 other directors they have worked with, analysts who are aware of unhappy shareholders, other unhappy shareholders who are often fellow value investors, and even former or current employees.