If an activist shareholder is looking to gain the support of the courts, it's important to remember to act like an adult.
"I know it's a lot of fun to write these nasty letters ... the type of stuff you wish you could have said to that [high school] bully," Vice Chancellor Travis Laster of the Delaware Court of Chancery said at TheDeal's first annual corporate governance conference in New York on Monday.
However, when activist fights go sour and end up in the courts, Laster said the first thing he asks is, "Who's being the adult here?"
Laster was joined on stage by Jim Cramer, who moderated the panel; Real Money contributor Eric Jackson of Spring Owl Asset Management; Joseph Frumkin and Marc Trevino, both partners at Sullivan & Cromwell; Richard Mansouri of Sandell Asset Management; and James Snyder, former senior vice president and general counsel of Family Dollar.
In a conversation spanning 45 minutes, the panelists weighed in on their own activist campaigns and the appropriate tone for activists to take when engaging with their newest target.
In some ways, things have been improving for shareholder activists -- once more commonly known as "corporate raiders." The chances of activists approaching a board and getting stonewalled are near zero, said Frumkin, who was named "Dealmaker of the Year" in 2004 by The American Lawyer.
That's not to say that activists don't sometimes make things more difficult. Frumkin pointed out that Carl Icahn's tweets, which may take him only 30 seconds to write, can cause hundreds if not thousands of hours of extra work for all parties involved.
"If you're going to be an activist, you generally want to avoid the proxy route," Mansouri said. All panelists agreed that forcing issues to go the proxy fights are generally more expensive and bear other risks as well. Sandell Asset Management recently lost a proxy fight against Ethan Allen (ETH) . Even so, shares of the company are up 20% year to date, which could be interpreted as ultimately successful for shareholders.
"Once the activist shows up, anything you do, the activist gets credit," Trevino joked.
Snyder of Family Dollar reflected on the mixed nature of activist involvement when Family Dollar was acquired by Dollar Tree (DLTR) last year. The outcome of the deal was uncertain, as Dollar General (DG) also made a bid for Family Dollar. There was also activist pressure from investors Carl Icahn and Nelson Peltz's Trian Fund Management. Ultimately, the Dollar Tree bid proved to the better deal for Family Dollar shareholders, he said, as it provided the best long-term outcome for the company.
"Maximizing stockholder value is not the short-term stock price," Laster said.