One way to look at how the future of activism is perceived in the U.S. is to follow the data. Tracking the number of campaigns (down a bit in 2017) or assets under management (continuing to slide in North America) suggests a certain downbeat narrative. Another – more upbeat – perspective is had by following the money.
The beginning of 2018 sees activist defense units sprouting up all over, and a number of transfers to help staff them. Yesterday, it was announced that Kai Liekefett, who led Vinson & Elkins’ defense practice, would join Sidley Austin to run a team focused primarily on representing companies in engagements with activists.
In an interview with me Wednesday, Liekefett said Sidley Austin’s “world class” governance and Securities and Exchange Commission practices, global breadth, and relationships with tech companies, financial institutions, and real estate investment trusts attracted him to the firm.
Sidley follows Kirkland & Ellis, which hired Eric Schiele from Cravath, Swaine & Moore to be its point man on activism. Kirkland in 2015 lost Richard Brand to Cadwalader, Wickersham & Taft, and Stephen Fraidin to Bill Ackman’s Pershing Square Capital Management. The two firms join Skadden, Arps, Slate, Meagher & Flom, Paul, Weiss, Rifkind, Wharton & Garrison, and Wachtell, Lipton, Rosen & Katz in vying for large-cap mandates.
Big law has long had the activism bug, but moves tend to come in fits and starts. Before this latest round, the juggling had been on the activist side – kickstarted by David Rosewater’s move to investment bank Morgan Stanley. After a quiet and slightly volatile 2016, there was reason enough for postponing expansions. Last year, there were almost 20% more U.S. companies worth more than $10 billion publicly targeted by activists, so it’s fair to say that the market for defense work looks a lot rosier.
The banks have continued to hire briskly, with the newest entrants increasingly focused on the middle market, rather than the largest companies. Thanks to the global trends in M&A, they have increasingly taken their business outside of the U.S. too.
Two unusual situations this week highlight some of the benefits of extending activism response frameworks to all shareholders. Lesson one is that “white knights” sometimes see their shine tarnished (for those familiar with American Super Bowl broadcasts, this is not a Tide ad). Patrick Soon-Shion’s Nant Capital was originally allowed to buy a stake in tronc to help ward off a hostile bid from Gannett but soon fell out with tronc’s chairman, Michael Ferro, and has now ended up buying the company’s flagship asset, the Los Angeles Times. And Perry Ellis International’s founder and largest shareholder, George Feldenkreis, is now reportedly plotting a takeover bid for the company in protest at the way it is being run just months after he was ousted from an executive role.
Neither is a traditional activist but both have certainly created plenty of work for both lawyers and bankers. Each was a potential disruptor that could perhaps have been contained earlier. There is plenty of waiting around to see what an activist might do or say in defense work, so the prize for the lawyer who can protect company boards from threats such as these without reaching into the toolbox of poison pills should indeed be great.
Quote of the week comes from DealBook’s interview with Jonathan Bush, the CEO of athenahealth, on how Jeff Immelt’s appointment as chairman of his board will help him grow the business while Elliott Management, a 9% shareholder, lurks in the background. One wonders whether Immelt, the CEO of General Electric until last year, could complete the metaphor by helping to rejuvenate Las Vegas – perhaps by helping out that other troubled company, Wynn Resorts?
“I literally feel like I just scored a decade’s worth of guitar lessons from Elvis.”
Article by Activist Insight