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Activist investors: 5 top tips for countering their narrative

30May Posted by Alex Cook

Large capital management firms continue to progessively invest more into companies perceived to be underperforming, with the aim of altering how the company is managed, to unlock value for themselves and other shareholders. The activist asset management industry has grown precipitously in recent years as lucrative activist tactics become increasingly popular.

Whereas previously activists were seen as ‘corporate raiders’ or ‘vulture capitalists’, only out to make a quick buck, they are now more often portrayed (or portray themselves) as the ‘good guys’ aiming to boost the value of the targeted company for all shareholders equally.

Fellow stakeholder ‘buy-in’ is now critical in most activist campaigns. Without it, the activist has no leverage with the board of the targeted company; careful messaging and winning the narrative battle are therefore essential to the activist’s campaign. A campaign can come in the form of open letters detailing the target company’s alleged underperformance or vitriolic personal attacks on prominent members of the management team.

The threat or reality of business disruption can further reinforce the activist’s narrative as accusations of a lack of focus by company management can become a self-fulfilling prophecy. This state of affairs can then lead to loss of market share as a company’s reputation is tarnished by a bruising public campaign with the activist.

The counter playbook – 5 top tips

A proactive defence is always better than a reactive one as stopping a campaign from developing in the first place is far more effective than attempting to fight an activist in an ongoing battle. Therefore, before any potential activist strikes, an in-house comms team should:

1). Provide clear and consistent messaging communicated from the board and senior management on the ‘value creation story’ – how this team plans to create value and why it is best placed to do so.

2). Communicate cash allocation strategy. If there is excess cash on balance sheet, explain why and ensure the right messages are being disseminated to shareholders (whether it is being held in reserve for R&D or as a buffer against a drop in commodities prices for example). Additional action: send your shareholders monthly updates on the cash flow strategy, sticking to key messages.

Once a campaign is underway, there are three key tactics which should be utilised:

3) . Avoid ‘stonewalling’. Refusing to engage with an activist either privately or publicly usually makes them engage in more aggressive tactics. It can also damage the company’s credibility among other shareholders if there is a perception that the company is failing to even recognise a potentially attractive strategic alternative

4). Different publics require tailored messaging, so while the core story during an activist campaign stays the same, different parts are highlighted for other shareholders/employees/the board/the media/market analysts etc. Consistency of messaging is key to ensure that there is no room for misinterpretation by the listeners/audience. Additional action: Map your stakeholders and develop key messages for each. Send briefed, on-message spokespeople to talk to the media and disseminate the management view.

5). Isolate activist shareholders. These activist campaigns are generally determined by who does a better job of communicating with affected stakeholders. Actively engage other key shareholders to address their concerns and try to decouple any allies from the main agitator. Additional action: approach your five other biggest shareholders to persuade them to back the management over the activist. Issue open letters questioning the activist’s intentions and detailing why it is the management that has the best interests of the company at heart.


Activists are certainly using more subtle methods than previously, sculpting and honing their messaging rather than throwing their weight around through high equity stakes; the move from unilateralism to building consensus among other shareholders gives them more legitimate leverage in promoting their agenda for change.

Due to the proliferation and increasing frequency of activist tactics, smaller cap firms are now being increasingly targeted alongside their headline-making peers. Therefore, all corporations should prepare themselves against this threat by promoting open, transparent communication of company strategy, clearly articulating the vision for value creation to all invested stakeholders.

For the full Sermelo white paper on the subject, contact Alex Cook - for access to our research.

Alex Cook
Alex Cook

Alex joined Sermelo in March 2017, having previously worked at the Chatham House. Chatham House engages governments, the private sector, civil society and its members in open debate and confidential discussion on the most significant developments in international affairs. While working there, he gained valuable relationship building skills and developed a nuanced understanding of the needs of corporate clients in guarding against political risk, which feeds directly into his current work in public affairs with Sermelo.

Alex graduated from King’s College London with a BA in Classics in 2014. Alex enjoys football (watching and playing), volleyball, reading, theatre and politics.

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