Hostile bids comprise an increasingly significant portion of M&A volume and boards of directors must be prepared to defend against them. In 2006, more than 10 percent of global M&A activity was hostile. Commentators expect that number to rise due to increased shareholder activism and market dynamics, which have ushered in a new era of aggressive hedge fund acquirers that control vast pools of capital. Activists are well-versed in how to engage in hostile activity, and often echo the sentiments of core shareholders. To minimize the risk of its company becoming the target of a successful hostile bid, a board of directors must put in place preventive measures that will allow the company to prepare for and defend against hostile activity. Boards always must keep in mind that a hostile bid presents a serious risk that control of the company will change (often with little to no premium for the shareholders) and that being unprepared to defend against unsolicited bids significantly increases that risk.
At Foley’s sixth annual National Directors Institute on March 8, 2007 in Chicago, “The Board’s Role in Defending Against Hostile Binds” was a featured breakout session. Moderated by Steve Vazquez, partner, Foley & Lardner LLP, the panel included Bryan Armstrong, partner, Ashton Partners; Justin Friesen, executive director – M&A, UBS Securities LLC; Richard Grubaugh, senior vice president, D.F. King & Co., Inc.; Charles Hansen, executive vice president and general counsel, Saks, Inc.; and Cary Kochman, managing director, UBS Securities LLC.