Morgan Joseph

“Do Hedge Fund Activists Have You In Their Sights?” (Chief Executive magazine)
9/15/06

Feature article authored by Morgan Joseph’s Shareholder Activist Group argues that, despite media coverage to the contrary, activism is not necessarily drawing out the adversarial process. The activist fund, like all investors, is interested in seeing its holding appreciate and believes that it has a plan that (in the portfolio manager’s mind) is superior to management’s for achieving that goal. According to a 2006 study completed by the firm’s Shareholder Activist Group, activist funds have had surprising success with their proposals—with more than 35 percent of the campaigns analyzed resulting in an activist winning board representation. At its core, writes Randy Lampert, Managing Director and head of the Group, shareholder activism is a communications battle to win the support of the shareholder base to back a particular direction for a company. As activism has become an increasingly recognized investment strategy, other investors have begun to follow activist funds into particular situations, thereby increasing the likelihood that the fund will succeed. For target companies, a quick response is key to taking control of the public dialogue, and if management believes that what the activist fund proposes is shortsighted or incorrect, this needs to be communicated to shareholders swiftly or else the company risks losing a one-sided argument. Morgan Joseph’s Shareholder Activist Group counsels companies on the benefits of developing a framework for management to work with professionals in addressing activist concerns or to head off intervention by activists before they arise. The first step, writes Mr. Lampert, is an objective, analytical review of the company, its plans, projections, and investments in research, development, capital equipment and marketing.