Dealing with the Threat from Shareholder Activists

Forensic & Litigation Consulting

July 29, 2015

Oil drilling in water

When an energy company was targeted by aggressive shareholder activists, FTI Consulting was able to help it repel the threat.

In 2014 we were approached by a large oil and gas company who had been targeted by two aggressive activist investors. It was clear that the investors were aiming to gain control of the company by placing their nominated representatives on the board, and our client asked for the help of our Global Risk and Investigations (‘GRIP’) practice to help build a defensive strategy to repel them.

GRIP’s investigative capabilities are often used by companies facing such situations, as our experts are able to understand the interests and drivers of the predatory company. In this particular situation, our primary objective was to look into the history and modus operandi of these investors and analyse their recent deal history. We were keen to identify whether they had any credibility within the energy sector and also review their track record in managing previous acquisitions.

Our in-depth investigations and expertise quickly showed that the two investors were clearly and unashamedly asset strippers whose primary focus upon acquiring companies was to cut jobs and investment and maximise short-term returns.

It also became clear that the threat was being driven primarily by just one of the funds, who had limited experience in the sector. This company had been the subject of a series of reputational and regulatory concerns around its previous investments, none of which were related to oil and gas.

As with many aggressive activist investor situations, a core part of our strategy was to work closely with FTI Consulting’s Strategic Communications practice to build and develop an effective defensive plan for the client. We worked with the relevant national, local and trade media to publicise the concerns we had identified and bring to the attention of the investor community and the public their lack of experience in the sector, their previous difficulties with the authorities and the severe cost and job-cutting strategies which they had a track record of employing.

Outcome: As a direct result of our investigation and subsequent communications campaign, the hostile takeover attempt was unsuccessful.

Not only were the activist investors unable to place their nominated people on the company’s board, but our communications efforts were such that there was no damage to the company’s value or reputation from the episode.

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