For the third time in recent months, noted corporate attorney Martin Lipton is taking on hedge funds with something of a battle plan in the event of an attack by activist hedge funds. His 30-point checklist, issued as a client memorandum earlier this month, is a basic preparation and response plan. Lipton recommends, for example, that a takeover target should arm itself with a team of key officers, a lawyer, an investment banker and others as a first line of defense. He suggests a company prepare the board of directors to deal with an activist situation, such as “maintaining a unified board consensus on key strategic issues,” and advises that if approached in a non public way, there is “No duty to discuss or negotiate,” adding that a company should “avoid mixed messages.”
“Response to a hedge fund attack is an art, not a science,” Lipton writes in the preamble to his plan, which he calls an “aide memoire” for developing a specially tailored defense program. “Failure to prepare reduces a target’s ability to control its own destiny.”
In a counterattack in response to news of the memo, Barry Rosenstein of Jana Partners writes in the Financial Times that there are many “misperceptions” about hedge fund roles. The title of his piece says it all: “Activism is good for all shareholders.”