Shareholder Activism in the Industrials Sector | The New Normal | FTI Consulting

Shareholder Activism in the Industrials Sector: The New Normal

Strategic Communications

October 8, 2013

several industry pictures

Thanks to the industrials sector’s long-standing reputation as a source of solid, steady returns, investors have often given management teams wide latitude to pursue long-term growth strategies.

Not anymore.

Shareholder activism is continuing its recent rise, as weaker macro-economic growth, vague strategic plans, stagnant margins, complex business model, and under-utilized balance sheets have emboldened shareholder activists and even traditional long-term investors.

Today’s activists often want less growth spending, aggressive cost cutting, monetizing of non-core assets, high-level personnel shakeups and greater short-term returns for shareholders.

This trend is not going away, and few industrial companies are immune from increasing activist demands – even if the organization is thriving. These investors have both the capital and the willingness to challenge even the largest and most well-established industrial companies.

In response, industrial companies need a proactive strategy to head off activism well before it happens. Management must recognize the structural and financial factors that attract activists, and make it a priority to strengthen relationships during the proxy offseason with key investors, proxy advisers and the media.

Being a target of activism is no accident and neither is avoiding it. Understanding why and how industrial companies have been targeted by activist shareholders is critical to ensuring a company is not next on the target list.

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