Shareholder activists get more attention in the media when they pursue large-cap companies, but shareholder activism has long been part of the mid- and small-cap market. Smaller companies may actually be easier targets, because it will be less expensive to acquire a significant position in the stock, and there may be more inefficiencies in pricing and liquidity that can be exploited by an activist investor over the course of its investment. Mid-cap and smaller companies are often ill prepared for the onslaught of an activist campaign. They may not have an articulated corporate strategy; their corporate governance systems may be easier to attack; and they may have trouble engaging with their shareholders. Unwilling to devote resources to a fight, they may give in too readily to activist demands. Or instead, they may reject negotiations, dig in their heels and risk everything in a battle for corporate control.
Originally published in BNA’s Corporate Counsel Weekly - July 12, 2017.
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