Fact-Finding in Contests for Corporate Control
IGI helps clients prevail in contests for corporate control through the collection and sophisticated analysis of information about adverse parties, including the extent (or lack) of financial resources, integrity, business competence, and past track records. Such insight has proven instrumental in our clients’ efforts to thwart – or execute, as the case may be – a hostile takeover attempt or proxy contest.
Through this process, we may uncover previously undisclosed financial or corporate governance irregularities or deficiencies on the part of a company and its executives, which may disqualify a would-be acquirer or unseat incumbent management. In the alternative, such information may strengthen our client’s negotiating position or shift the price or terms of a deal in our client’s favor.
IGI is typically retained early in the contest for corporate control as part of the client’s legal, investment banking, and public relations team. Clients incorporate IGI’s findings in court filings seeking to enjoin or compel takeover-related measures, or communicate the findings to shareholders, institutional investors, lenders, and other stakeholders who may be influential in the contest’s outcome. Clients also may submit information compiled by IGI to government antitrust or other regulators who are positioned to affect the course of events.
IGI also defends client companies, their officers, and their directors against attacks on their reputations by adversaries who may seek to disseminate false or misleading rumors aimed at influencing the outcome of the contest for corporate control.
In hostile takeover defense cases, IGI has, for example:
- Identified material misrepresentations and omissions in the SEC filings of would-be acquirers;
- Found breaches of fiduciary duty by the companies’ executives, including undisclosed conflicts of interest and self-dealing;
- Discovered irregularities in executive compensation;
- Detailed and documented companies’ pattern and practice of asset stripping or failure to effectively integrate previously-acquired companies and accomplish promised synergies;
- Demonstrated that would-be acquirers lacked the financial wherewithal to consummate a deal, or that their financing was highly contingent, thereby allowing our client to adopt an aggressive posture;
- Shown that would-be acquiring companies have misrepresented reported income via overly aggressive accounting or revenue recognition, or have understated liabilities – the revelation of which has the potential to lower the hostile company’s stock price and directly affect the value of a share-denominated bid; and
- Found evidence that hostile raiders have engaged in stock parking and illegal undisclosed concert-party actions, as well as market manipulation to drive down a target company’s share price as a prelude to a hostile bid.
- IGI provided information and analysis to assist its client, a publicly traded company in the healthcare industry, to fend off a hostile takeover attempt that threatened to derail its planned merger with another public company. IGI developed information showing that the unsolicited offer, although higher, was highly conditional and would burden the combined entity with debt. IGI also determined that the hostile suitor had issued millions of shares of its stock to a company that was one of its biggest clients, and had issued additional shares to that company’s CEO, under terms that raised an array of potential antitrust, legal, financial reporting and disclosure issues. IGI’s client won a favorable Delaware court ruling and a shareholder vote approving its preferred merger.
- A publicly traded company retained IGI to assist its defense against a proxy contest launched by an activist investor fund that proposed its own slate of nominees for election to the company’s board and prescribed comprehensive changes to the company’s management and operations. IGI found that biographies and credentials of the fund’s manager and two of the nominees, which had been included in the fund’s SEC filings, contained material misrepresentations and omissions. IGI also found that the fund had structured a series of equity investments in public companies in ways that unfairly favored the fund and its investors over other shareholders, and otherwise violated corporate governance norms. Our client used the information to negotiate a standstill agreement and other limits on the activist fund’s actions.