Drawing on his team's plentiful experience gained from squaring off with Sardar Biglari, Cracker Barrel Old Country Store General Counsel Michael Zylstra has partnered with Bass Berry & Sims attorney Howard Lamar to outline a playbook for handling the not-so-friendly approaches of an activist investor. Among the major points the two emphasize is the need to stay away from grandstanding — that's reserved primarily for the Biglaris, Ackmans and Icahns of the world — and to communicate clearly to the company's employees, who can be strongly affected by activists' claims. Also key: Working hard to get major shareholders up to speed and inoculated against the activist.
These interactions provide not only insight to the business of a company but also provide shareholders an appreciation for the importance of independent oversight through the board of directors. Furthermore, this empowers shareholders to be more trusting of management and the board, and potentially to be less susceptible to claims made by an activist as to allegations of improper or entrenching motives of management or a company’s directors. Notwithstanding the potentially persuasive observations of an activist, the development of relationships by a company’s representatives over time can be a significant advantage when shareholders are faced with choices in a proxy contest.
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