The telephone call came from a New York City hedge fund manager, minutes after market close on a Wednesday in mid-August, 2011. He wanted to know our response to the hostile takeover bid for MOSAID Technologies Inc. that Wi-LAN Inc. had just announced. The blood drained from my face—I was completely surprised. I took his name and number, hung up, and hustled off for the first of dozens of meetings. Thus began a grueling, 11-week fight that ended in early November when Sterling Partners, a U.S. private equity firm, made a superior all-cash offer to take MOSAID private, and Wi-LAN let its bid expire.
A hostile takeover bid or proxy contest tests the mettle of the board and senior management like no other. The company’s credibility is at stake. The board’s ability to realize shareholder value is put to the test and personal reputations are on the line. The public scrutiny is intense. Everyone is watching and analyzing every move—investors, sell- and buy-side analysts, institutional sales desks, M&A specialists, business media and regulators.
In a fight, IR is elevated to the board level, whereas in the normal course of business this often just isn’t the case. Most boards take a very keen interest in IR strategy and processes, because persuading shareholders and other stakeholders really does affect outcomes. In a high-pressure fight environment, where the consequences of missteps are grave, investor relations officers (IROs) must be at the top of their game.
But the curious thing about takeovers and proxy contests is that while we read about them all the time, for most executives and IROs, they are rare occurrences. “This is my first fight,” is a common refrain. Facing unfamiliar terrain, knowing what’s coming helps you prepare.
When a fight starts, boards typically appoint a special committee of independent directors. The special committee then hires financial, legal, communications and proxy advisers. Please note: the advisers report to the special committee, not to management. A truly independent special committee quickly asserts its primacy, making it known that while management has input, it is not in charge of the process. Yes, this is good corporate governance 101, but in practice adjusting to a fight situation requires management (which is used to running the show) and IROs to mentally recalibrate.
It’s absolutely critical that IROs immediately establish a solid working relationship with the special committee’s communications advisers. They need the IRO to bring them up to speed on the company’s business, its culture, the shareholder base, upcoming events and issues that might influence communications strategy. And the IRO needs their specialized knowledge. Most IROs don’t know how to write the highly legal language of “fight press releases” or directors’ circulars. Usually there’s no time to learn—if IR was operating anywhere near maximum capacity before the fight, the pace of events will overwhelm it when the battle starts.
A case in point is the challenges involved in coordinating fight-related communications with the special committee and the management team. In a fight, the advantage goes to whoever is fastest in responding to breaking events with a new press release and updated messaging and Q&As.
The fight environment resembles that of a political campaign. With a news cycle that’s measured in minutes and hours—think blogs, Twitter, online media—speed wins the day. For IROs and the special committee’s communications advisers, it’s essential to develop a fast-cycle approvals process. Too often, companies cede ground and lose the messaging battle for very simple reasons: approvals processes are too slow because there are too many people involved and deadlines aren’t imposed. At root, the failure speaks to poor processes and a lack of teamwork.
As much as anything, corporate fights bring a unique kind of pressure. All the normal business communications practices fall away. Time frames are severely compressed and the organization’s capacity for taking communications risks is severely tested. If the company is used to a thoughtful, careful approach, making snap, high-risk communications decisions can be so nerve-wracking as to induce paralysis—and that’s another reason why hiring experienced communications advisers is so important.
Fights also take a personal toll. As cliché as it sounds, watching your diet, hitting the gym and getting some sleep are critical to maintaining peak personal performance.
Michael Salter is senior director of investor relations and corporate communications at MOSAID Technologies in Ottawa. E-mail: firstname.lastname@example.org.