The 2007 Milken Global Conference
Just returned from the Milken Global Conference, Michael Milken's incredible in-gathering of stars from the worlds of finance, philanthropy, academia, the arts and politics. Among the bold face names in attendance were: Rupert Murdoch, John and Theresa Heinz Kerry, Pete Carrol (familiar to American football fans), Steve Forbes and, of course, Michael Milken himself.
Among the numerous panels I attended, the one which was perhaps the most interesting was a panel on activist investing. Russell Read of CALPERS, Ed Garden of Trian, David Batchelder of Relational and Chris Young of Institutional Investors Services participated in a panel moderated by Glenn Yago of the Milken Institute.
Ed Garden spent some time describing how Trian operates. They:
- Scour the public equity markets, looking for under-performing companies;
- Choose one whose business Trian understands;
- Acquire 4.9% of the outstanding share capital;
- Quietly contact management and propose changes to the way that management is operating the company;
- If management refuse, acquire more of the company, taking Trian over the 5% hurdle and announcing Trian's disagreement with the way management are running the company;
- If necessary, fight their way onto the Board in order to influence management;
- Sell shares once their efforts have resulted in a rise in the share price due to improvements in the company's underlying operating performance or improve capital allocation;
Trian does all of the this without taking a majority stake in the company. Instead, the force of Trian's arguments persuade the major institutional investors (like CALPERS) to back Trian in forcing strategic change on management.
By behaving like owners, Trian and firms like it are literally re-shaping the relationship between management and shareholders. As more funds begin to copy Trian's strategy, fewer bad management teams will have anywhere to hide. That has to be good for shareholders.
Among the numerous panels I attended, the one which was perhaps the most interesting was a panel on activist investing. Russell Read of CALPERS, Ed Garden of Trian, David Batchelder of Relational and Chris Young of Institutional Investors Services participated in a panel moderated by Glenn Yago of the Milken Institute.
Ed Garden spent some time describing how Trian operates. They:
- Scour the public equity markets, looking for under-performing companies;
- Choose one whose business Trian understands;
- Acquire 4.9% of the outstanding share capital;
- Quietly contact management and propose changes to the way that management is operating the company;
- If management refuse, acquire more of the company, taking Trian over the 5% hurdle and announcing Trian's disagreement with the way management are running the company;
- If necessary, fight their way onto the Board in order to influence management;
- Sell shares once their efforts have resulted in a rise in the share price due to improvements in the company's underlying operating performance or improve capital allocation;
Trian does all of the this without taking a majority stake in the company. Instead, the force of Trian's arguments persuade the major institutional investors (like CALPERS) to back Trian in forcing strategic change on management.
By behaving like owners, Trian and firms like it are literally re-shaping the relationship between management and shareholders. As more funds begin to copy Trian's strategy, fewer bad management teams will have anywhere to hide. That has to be good for shareholders.
Labels: finance, hedge funds, Milken
posted by Moses Kagan at
1:27 PM
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