00:00:06:18 - 00:00:09:16 Welcome to another edition of M&A Corner. 00:00:09:16 - 00:00:12:08 I'm joined today by Peter da Silva Vint, 00:00:12:08 - 00:00:15:03 a Managing Director at Jasper Street Partners. 00:00:15:03 - 00:00:17:15 Which is a specialized advisory firm 00:00:17:15 - 00:00:19:04 focusing on high-priority 00:00:19:04 - 00:00:21:21 matters that impact long-term value creation. 00:00:22:11 - 00:00:25:18 Shareholder engagement, proxy voting, activism 00:00:25:18 - 00:00:27:23 advisory, and corporate governance. 00:00:27:23 - 00:00:29:19 Peter, thanks for joining me today. 00:00:29:19 - 00:00:31:08 Thanks, Doug. Happy to be here. 00:00:31:08 - 00:00:33:16 Let's set the table a bit. We've seen a 00:00:33:16 - 00:00:34:11 Let's set the table a bit. We've seen a 00:00:34:11 - 00:00:37:00 continued rise in activism over the last several 00:00:37:00 - 00:00:40:07 years, really peaking last year with approximately 00:00:40:07 - 00:00:44:14 875 campaigns, both long and short campaigns. 00:00:44:14 - 00:00:48:13 That's continued into this year with a particular rise in 00:00:48:13 - 00:00:50:19 short campaigns in the early part of this year. 00:00:51:17 - 00:00:55:10 The campaigns have been targeting reasonably familiar themes. 00:00:55:10 - 00:00:58:05 Financial performance or the lack thereof, 00:00:58:19 - 00:01:04:01 board composition, and most recently ESG themes, 00:01:04:06 - 00:01:09:02 originally pro-ESG and now anti-ESG. 00:01:09:02 - 00:01:12:22 Let me start by asking you, what trends are you seeing? 00:01:12:22 - 00:01:16:09 That's a great question. I think leading into Q1 of this year, 00:01:16:09 - 00:01:19:02 some of the trends that we saw emerge last year, 00:01:19:02 - 00:01:22:18 one was proliferation of smaller activists. 00:01:22:18 - 00:01:25:18 Many of them had cut their teeth at the more brand name, 00:01:25:18 - 00:01:30:01 larger ones such as Elliott or Trian. 00:01:30:01 - 00:01:32:11 They've kind of come out with a bang. They've targeted 00:01:32:11 - 00:01:35:15 companies of all market caps. They've been super aggressive. 00:01:35:15 - 00:01:37:03 They've been super successful. 00:01:37:03 - 00:01:40:00 Another trend we saw was a record number of CEO departures. 00:01:40:14 - 00:01:44:06 Traditionally, activists didn't really focus on CEOs. 00:01:44:06 - 00:01:46:21 Shareholders seem to be less willing to 00:01:46:21 - 00:01:50:13 support an activist targeting a CEO, but that trend 00:01:50:13 - 00:01:52:22 seems to have shifted in the opposite direction. 00:01:52:22 - 00:01:55:15 I think the other thing we've seen is activists have 00:01:55:15 - 00:01:58:04 become more emboldened. They're going after larger targets, 00:01:58:04 - 00:02:00:08 and their asks have also become more aggressive. 00:02:00:08 - 00:02:02:12 So, instead of asking for a handful of 00:02:02:12 - 00:02:04:23 seats, they're asking for all of the seats. 00:02:04:23 - 00:02:07:02 That's pretty atypical, isn't it? 00:02:07:02 - 00:02:10:09 Yes, I think traditionally shareholders weren't comfortable with 00:02:10:09 - 00:02:13:06 ceding control to what people thought were short-term 00:02:13:06 - 00:02:16:07 minded investors. Over time, they've proven 00:02:16:07 - 00:02:18:21 themselves to be more credible to the BlackRocks, 00:02:18:21 - 00:02:22:07 the Vanguards, the State Streets, as drivers of 00:02:22:07 - 00:02:25:06 change, as catalysts to drive change where these 00:02:25:06 - 00:02:27:11 large shareholders have to— they can only vote. 00:02:27:11 - 00:02:30:16 They can't vote with their feet, and this is a way of 00:02:30:16 - 00:02:31:23 exacting that type of change. 00:02:31:23 - 00:02:35:15 So that reminds me of the expression constructivist 00:02:35:15 - 00:02:38:17 versus activist, and we didn't really touch on this yet, 00:02:38:17 - 00:02:42:05 but is that really just the same thing with a 00:02:42:05 - 00:02:46:16 different name? Is it still a wolf in sheep's 00:02:46:16 - 00:02:49:06 clothing, or do you feel like there really is a 00:02:49:06 - 00:02:52:01 change with a constructivist mindset? 00:02:52:01 - 00:02:55:22 I think there's a change. I think there's been feedback from 00:02:55:22 - 00:02:57:21 large shareholders that proxy fights are 00:02:57:21 - 00:03:00:11 distracting, they're a waste of money, and they're— 00:03:00:11 - 00:03:01:10 Super expensive. 00:03:01:10 - 00:03:02:13 Super expensive. They've gotten 00:03:02:13 - 00:03:06:20 more expensive over time. I think there is a class 00:03:06:20 - 00:03:09:15 of activists, or constructivists, that they actually 00:03:09:15 - 00:03:12:15 do come in, and they do request a meeting, and they 00:03:12:15 - 00:03:15:03 do say, this is our thesis. This is where we see 00:03:15:03 - 00:03:18:17 holes in your performance. Prove to us why we're wrong. 00:03:18:17 - 00:03:21:01 And if we’re wrong, we’re happy to kind of walk away. 00:03:21:01 - 00:03:22:17 And so you're seeing more of that, 00:03:22:17 - 00:03:25:22 but you still have sometimes the only way to get change 00:03:25:22 - 00:03:28:08 is to kind of go back to those old school roots. 00:03:28:14 - 00:03:32:04 Pivoting now to focus on the current environment. 00:03:33:22 - 00:03:33:23 As we entered 2025, I think everybody anticipated 00:03:33:23 - 00:03:36:18 As we entered 2025, I think everybody anticipated 00:03:36:18 - 00:03:41:03 a wave of traditional M&A stepping in, and while that 00:03:41:03 - 00:03:44:04 has yet to materialize as we're all waiting for a 00:03:44:04 - 00:03:46:13 little bit greater stability and clarity in the 00:03:46:13 - 00:03:50:10 administration, what it has caused is a tremendous 00:03:50:10 - 00:03:53:21 amount of economic uncertainty in the current environment. 00:03:53:21 - 00:03:56:08 A lot of market volatility. 00:03:56:08 - 00:04:00:09 Does that empower activists to be more aggressive, or are they 00:04:00:09 - 00:04:02:22 taking a back seat like the strategic acquirers? 00:04:02:22 - 00:04:05:05 I think it's the latter. I think activists, 00:04:05:11 - 00:04:08:08 fundamentally, they are value investors, and they 00:04:08:08 - 00:04:10:10 think about things like other investors do. 00:04:10:10 - 00:04:14:01 What we found is that they are on the sidelines. 00:04:14:01 - 00:04:19:07 Year-to-date, live campaigns launched, they're down about 30% 00:04:19:07 - 00:04:22:18 to 40% compared to last year. So what you're seeing 00:04:22:18 - 00:04:23:06 to 40% compared to last year. So what you're seeing 00:04:23:06 - 00:04:25:06 is they're kind of waiting for this noise to die 00:04:25:06 - 00:04:27:19 down and there to be a little bit more certainty. 00:04:28:01 - 00:04:30:05 There is a view, though, that post-April 2nd, when 00:04:30:05 - 00:04:32:14 we get more certainty on things such as tariffs, 00:04:32:17 - 00:04:35:22 that the activists will come back out. Another one 00:04:35:22 - 00:04:37:16 of these trends that we've seen that I didn't 00:04:37:16 - 00:04:39:22 mention before is that activists have made this a 00:04:39:22 - 00:04:42:14 year-round sport, so they're no longer beholden to 00:04:42:14 - 00:04:44:18 annual meeting cycles, and so they can kind of 00:04:44:18 - 00:04:46:18 announce themselves any time of the year. 00:04:46:21 - 00:04:51:16 So would you say that the activists are adopting new 00:04:51:16 - 00:04:54:14 strategies to address the current environment? 00:04:54:14 - 00:04:57:22 So have the strategies changed? Have the themes changed? 00:04:57:22 - 00:05:02:04 Or is it more continuation of the same, but 00:05:02:04 - 00:05:05:18 with the current market backdrop? So what we've seen 00:05:05:18 - 00:05:08:20 so far this year, last year you saw Elliott take 00:05:08:20 - 00:05:11:12 multiple, multi-billion dollar positions in 00:05:11:12 - 00:05:15:06 companies and ask for change. We haven't seen that 00:05:15:06 - 00:05:18:10 so much this year. Today you saw Starboard announce 00:05:18:10 - 00:05:20:05 that they were running a proxy fight at Autodesk, 00:05:20:17 - 00:05:24:06 their $500 million stake in a $56 billion company. 00:05:25:04 - 00:05:27:11 Earlier this week, Engine Capital announced a 00:05:27:11 - 00:05:30:22 settlement with National Vision. The window had 00:05:30:22 - 00:05:33:14 closed a few weeks ago. There was no mention of an 00:05:33:14 - 00:05:36:03 activist in the stock, but they were able to hash 00:05:36:03 - 00:05:38:14 out a settlement behind the scenes quietly. 00:05:38:14 - 00:05:40:14 So things have changed a little bit. 00:05:40:14 - 00:05:45:02 What would you say are the key elements of an effective defense strategy? 00:05:45:02 - 00:05:47:23 I think being prepared is the most 00:05:47:23 - 00:05:48:16 effective defense strategy. 00:05:48:16 - 00:05:49:22 What does that mean? 00:05:49:22 - 00:05:52:09 So, I mean, outside of having a well-performing stock 00:05:52:09 - 00:05:55:16 price, I think it's organizing a team of advisors, 00:05:56:09 - 00:05:59:05 looking inwards, you know, where are potential gaps 00:05:59:05 - 00:06:03:01 in your governance profile, looking outwards. 00:06:03:01 - 00:06:06:06 How are you trading relative to your peers? And then how 00:06:06:06 - 00:06:09:02 do you think about any sort of shortcomings? 00:06:09:02 - 00:06:11:02 And then I think finally, too, just knowing your 00:06:11:02 - 00:06:14:20 shareholder base, engaging with them consistently in 00:06:14:20 - 00:06:18:15 what we call the off-season, finding out what their 00:06:18:15 - 00:06:22:09 pressure points are and where they may have issues 00:06:22:09 - 00:06:25:02 with you should somebody else come unannounced. 00:06:25:02 - 00:06:28:06 I use the expression bringing activism in-house. 00:06:28:06 - 00:06:34:12 And I think that's really critical advice, is having an 00:06:34:12 - 00:06:38:05 objective lens for a management team to spend time 00:06:38:05 - 00:06:42:20 looking at the company unemotionally, how an 00:06:42:20 - 00:06:45:17 objective outsider might look at the company, 00:06:45:17 - 00:06:48:16 and being comfortable enough to look at where those 00:06:48:16 - 00:06:51:18 shortcomings are and proactively work to address those. 00:06:51:18 - 00:06:54:16 I was also struck by something else you said, 00:06:54:16 - 00:06:55:20 which is maintaining an active dialogue with your 00:06:55:20 - 00:06:58:21 which is maintaining an active dialogue with your 00:06:58:21 - 00:07:03:15 most important shareholders, but making that more of 00:07:03:15 - 00:07:08:23 a continuous process versus episodic. So making it a 00:07:08:23 - 00:07:11:16 regular part of your conversation with your 00:07:11:16 - 00:07:14:00 institutional shareholders, making sure they 00:07:14:00 - 00:07:16:22 understand management strategy. I don't mean to be 00:07:16:22 - 00:07:19:16 putting words in your mouth, but is that the kind of 00:07:19:16 - 00:07:20:14 thing you're talking about? 00:07:20:14 - 00:07:24:01 Yeah, and you know, this engagement paradigm has shifted a little bit in the 00:07:24:01 - 00:07:27:03 last month because the SEC has given new guidance on 00:07:27:03 - 00:07:29:09 how these large shareholders can interact with the 00:07:29:09 - 00:07:32:11 companies that they own. But traditionally, that's 00:07:32:11 - 00:07:34:18 been the case, is that you are in front of them, 00:07:35:01 - 00:07:38:05 you're offering up conversations, you are sharing 00:07:38:05 - 00:07:40:18 your views on strategy and driving long-term 00:07:40:18 - 00:07:42:13 shareholder value, because that's how they kind of 00:07:42:13 - 00:07:44:21 see it, is that they're long-term holders of the company. 00:07:44:21 - 00:07:47:09 They'll be there after you leave. They were 00:07:47:09 - 00:07:49:12 there before you were there. So they want to see 00:07:49:12 - 00:07:51:17 that you're a good steward of shareholder value. 00:07:51:17 - 00:07:54:10 Peter, you mentioned the recent SEC rule change 00:07:55:01 - 00:07:57:03 regarding filing obligations. 00:07:57:03 - 00:07:59:00 Can you expand upon that a little bit? 00:07:59:00 - 00:08:00:20 Yes, so last month, the SEC 00:08:00:20 - 00:08:05:01 issued guidance on 13G and 13D filers. 00:08:05:01 - 00:08:07:18 So 13G filers are passive holders. 00:08:07:18 - 00:08:09:08 So you think of the large 00:08:09:08 - 00:08:13:04 institutional investors, BlackRock, Vanguard, State Street. 00:08:13:04 - 00:08:15:02 What they do is they have large percentages 00:08:15:02 - 00:08:18:09 of ownership, but they have no plans on exerting 00:08:18:09 - 00:08:20:03 control or influence over a company. 00:08:20:03 - 00:08:22:21 So they’re engaging, they’re talking about strategy, 00:08:22:21 - 00:08:24:02 they’re talking about governance, 00:08:24:02 - 00:08:26:09 they’re talking about environmental and social issues. 00:08:26:09 - 00:08:28:03 And that’s been the case for many years. 00:08:28:03 - 00:08:30:11 So now, recently, the SEC is saying that 00:08:30:11 - 00:08:32:13 engaging in those topics may be viewed 00:08:32:13 - 00:08:35:10 as trying to exert control and influence on these companies. 00:08:35:10 - 00:08:37:21 And so these large institutional 00:08:37:21 - 00:08:40:08 shareholders may have to file 13Ds, which is what 00:08:40:08 - 00:08:43:18 activists do. And what it’s done is there’s been a 00:08:43:18 - 00:08:46:19 chilling effect on engagements. BlackRock and 00:08:46:19 - 00:08:49:12 Vanguard paused engagements while they tried to 00:08:49:12 - 00:08:51:08 digest what this meant for them. 00:08:51:08 - 00:08:54:15 There actually was a large proxy fight last month where this happened 00:08:54:15 - 00:08:56:12 in the middle of the fight just before the vote. 00:08:56:12 - 00:09:00:11 And I think what they’ve come to the conclusion is they 00:09:00:11 - 00:09:02:20 will engage, they will give a disclaimer that 00:09:02:20 - 00:09:06:09 they're not attempting to influence or exert control over a company. 00:09:06:13 - 00:09:08:19 So we've talked about what 00:09:08:19 - 00:09:12:04 makes for good defense preparedness. Let's look at 00:09:12:04 - 00:09:13:18 makes for good defense preparedness. Let's look at 00:09:13:18 - 00:09:15:22 it from the other side. When you're seeing that 00:09:15:22 - 00:09:18:15 companies are making mistakes, what are the most 00:09:18:15 - 00:09:21:06 common mistakes you see? And I think that's helpful 00:09:21:06 - 00:09:24:07 because if people understand what the most common 00:09:24:07 - 00:09:27:07 pitfalls are, we can work proactively with clients 00:09:27:07 - 00:09:29:16 to try and address those up front. 00:09:29:16 - 00:09:33:11 Yes, I think the most common mistake, I guess the two most common 00:09:33:11 - 00:09:37:03 mistakes are, one, taking it very personal. 00:09:37:03 - 00:09:40:19 A lot of times you see a CEO where either he's the founder, 00:09:40:19 - 00:09:43:16 he's been there for a long time, and he feels like 00:09:43:16 - 00:09:45:21 these activists are trying to take the company away 00:09:45:21 - 00:09:49:08 from him, whereas if you think about the fact pattern, 00:09:49:08 - 00:09:51:16 it's not that different from any of their other campaigns. 00:09:51:16 - 00:09:56:17 This is not a specialized, targeted campaign going after this particular CEO. 00:09:56:17 - 00:09:58:14 I think that that's one issue. And then I think the other one is, 00:09:58:14 - 00:10:02:06 like you mentioned before, ignoring the 00:10:02:06 - 00:10:06:01 large shareholders, putting a lot of emphasis on 00:10:06:01 - 00:10:09:06 maybe ISS and the proxy advisors and believing that 00:10:09:06 - 00:10:11:19 a positive recommendation there is going to bail you out, 00:10:11:19 - 00:10:13:20 because that's not the case. I think over time 00:10:13:20 - 00:10:16:01 these large shareholders have shown that they do 00:10:16:01 - 00:10:18:20 their own research and they make their own decisions. 00:10:18:20 - 00:10:22:08 You mentioned in the defense preparedness 00:10:22:08 - 00:10:29:05 phase what companies should be focused on to avoid 00:10:29:05 - 00:10:32:13 or prepare for an activist. 00:10:32:13 - 00:10:35:22 In the unfortunate event, though, that somebody does receive a call, 00:10:36:23 - 00:10:40:14 what would you say are the first course of action 00:10:40:14 - 00:10:44:18 that a CEO or a board chair should take? 00:10:44:18 - 00:10:47:15 That's a great question. I think the first step they should 00:10:47:15 - 00:10:51:12 take is calling their friendly bankers at Mizuho | Greenhill. 00:10:51:23 - 00:10:56:00 I do think that every company has a bank, 00:10:56:02 - 00:10:58:16 they've got a lawyer, but not necessarily a 00:10:58:16 - 00:11:00:21 specialized bank or specialized lawyer. 00:11:00:21 - 00:11:04:10 And so I think what they need to do is look long and hard at 00:11:04:10 - 00:11:07:17 their advisor deck and see whether or not they need 00:11:07:17 - 00:11:10:18 to supplement that. So calling a Jasper Street where 00:11:10:18 - 00:11:13:02 we specialize, where we're tactically targeting your 00:11:13:02 - 00:11:16:01 shareholder base, looking at some of these law firms 00:11:16:01 - 00:11:19:12 where this is their bread and butter, making sure 00:11:19:12 - 00:11:22:13 that those people on board will optimize outcomes. 00:11:22:13 - 00:11:28:02 I happen to agree with you that the best response is a 00:11:28:02 - 00:11:31:20 proactive approach where the board has a 00:11:31:20 - 00:11:35:05 well-defined sense of the company's standalone intrinsic value. 00:11:35:05 - 00:11:38:00 You've done the analysis on if it's a 00:11:38:00 - 00:11:40:09 situation where somebody's advocating for a breakup, 00:11:40:18 - 00:11:44:09 the sum of the parts valuation. And the worst time 00:11:44:09 - 00:11:47:13 to have your back against the wall is to be facing 00:11:47:13 - 00:11:52:11 those issues upon receipt of an inbound approach, 00:11:52:11 - 00:11:55:01 which is why we're always advocating with clients 00:11:55:01 - 00:11:57:12 that they're proactively reviewing those strategies. 00:11:58:00 - 00:11:59:15 That's right. That's a sound way to do things. 00:11:59:19 - 00:12:01:16 Peter, thanks again for joining us today. 00:12:01:16 - 00:12:02:14 Thanks, Doug. 00:12:02:14 - 00:12:04:21 It's such a rich and important topic. 00:12:04:21 - 00:12:08:05 I feel like we could go on for hours, but don't have the time. 00:12:08:14 - 00:12:10:17 And thanks again for joining us for another 00:12:10:17 - 00:12:12:18 episode of M&A Corner. 00:12:12:18 - 00:12:13:18 Please reach out to your 00:12:13:18 - 00:12:16:14 Mizuho | Greenhill banker to further discuss 00:12:16:14 - 00:12:19:02 activism, preparedness, and response.