A New Yorker on activist investors might tell you, "Oh, here we go again." When an agitator starts sniffing around, you know there’s about to be a shake-up. Richard Mansouri from Arkhouse Management Co. LP recently shared some candid thoughts on this in The Activist Investing Today Podcast. Sit tight because he paints quite the picture of how these boardroom battles play out.
Why, you ask? Companies often react with the grace of a bull in a china shop the minute they catch wind of an activist investor buying stock. They rush to slap some new management-backed folks onto the board to create the illusion of action. However, in reality, it’s quite the show of desperation.
Contents
The Reactive Company Playbook
Mansouri, with his experiences from the ranks of activist firms like Elliott Management Corp. and Sandell Asset Management Corp., knows the playbook all too well. He says companies have this knack for being totally blind to their issues until someone turns on the light.
Imagine this: you’re running late to a party because you just noticed a stain on your shirt. Instead of addressing it when it happened, you put a jacket over it. That’s precisely what these companies do by adding new directors to combat the activist’s agenda. Cosmetic changes are rarely the fix.
The Timing Game
Activists need to have precise timing. If they make their move too early—oh boy—the companies can swap out the problematic directors and bring in new faces, presenting them as governance wizards. It’s as if they’ve been playing a game of musical chairs without realizing the tune stopped ages ago.
At Arkhouse, Mansouri emphasizes the misnomer that many so-called “independent” directors are just not that. Companies, armed with investor funds, sometimes counteract shareholders’ interests under a cloak of independence. It’s almost like watching a magician’s act where the magic trick is really just smoke and mirrors.
Activist Investing Insights
So, what’s the secret sauce when dealing with rebellious shareholders? Timing. Knowing when to pounce is critical. Wait too long, and the company could flip the boardroom script. Move too early, and risk alerting the defenses.
For more of these no-nonsense insights, listen to the podcast with Richard Mansouri. And if that role wasn’t enough for you, there’s a buffet of other podcasts from The Deal available on iTunes, Spotify, and over at TheDeal.com. It’s like New York pizza–there’s a slice for everyone.
Realigning the Boardroom Table
Whether it’s adding new directors or shifting chess pieces on the board, when activist shareholders come knocking, complacent companies inevitably feel a jolt. A great board would have tackled problems much earlier. After all, who wants to be the last one to arrive at the governance party?
