Agenda Quotes Andrew Freedman on Activist Settlements

Agenda (subscription required) recently quoted Co-Head of Olshan’s Activist & Equity Investment Group Andrew Freedman on the rise of settlement agreements in activist campaigns. Every year since 2014, the article explains, more board seats have been won through settlements than by full-fledged proxy fights, with 35% of the 78 total proxy fights in 2017 ending in settlements and 36% of the 76 total proxy fights thus far in 2018 ending in settlements. “It’s been easier [this year] for the board and activist to arrive at a peaceful resolution geared around board representation and strategic operational changes,” Mr. Freedman points out. He goes on to affirm that “[Settlement agreements] are back in vogue in 2018 as the predominant way that these contentious situations involving activist investors are being resolved.” Though some experts warn that the terms of settlement agreements can easily impede a company and its board’s interests, Mr. Freedman does identify one clear advantage of settling: “There are costs to running a proxy fight, and time and energy and resources on both the company and the activist investor’s part. If you can get to a place where, through constructive dialogue and engagement, the board and activist can settle their differences, then generally speaking, that is a good development for the company and all of its stakeholders, rather than the continued public tit for tat and escalation of tensions.” Still, he proposes that leverage is key, because if a company has performed unsatisfactorily or if it suffers from significant governance issues, activists may be emboldened by these issues and will have an upper hand when negotiating a settlement agreement.