Directors: Know the Risks before Caving to Activist Demands for a Public Sales Process
Disclosing a strategic review can be the most important decision of a public company director’s tenure. Directors facing activist pressure to announce should weigh the benefits and costs, including the probability and consequences of failing to find a buyer. In December 2021, Bloomberg reported that activist JANA Partners had taken a stake in Mercury Systems […]
Patrick Ryan is an Executive Vice President at Edelman Smithfield. This post is based on a Edelman memorandum by Mr. Ryan, Lex Suvanto, and Josh Hochberg.
Disclosing a strategic review can be the most important decision of a public company director’s tenure. Directors facing activist pressure to announce should weigh the benefits and costs, including the probability and consequences of failing to find a buyer.
In December 2021, Bloomberg reported that activist JANA Partners had taken a stake in Mercury Systems and intended to push the defense technology firm to explore a sale. The news sent the company’s shares 10% higher.[i] The following June, Mercury and JANA signed a cooperation agreement, which saw the addition of two independent directors to the company’s board. In January 2023, Mercury said it would initiate a review of strategic alternatives – a euphemism for a sales process.
The company said in June 2023 that it had ended the review and would continue as a standalone company. On the trading day following the announcement, shares were trading more than 40% below where they were when Mercury disclosed the review. The stock has yet to recover.
