How do activist investors get a company to listen to them?

Let's say Icahn takes a stake in a large company and demands share buybacks and the company tells him to **** himself. How is he going to go about producing changes at the company?

I'm specifically trying to understand the voting rights situation. How much of the shareholders does he have to convince to produce changes? And how would he actually go about convincing them? Would he call a meeting, etc? I know there are a lot of minute details involved, but if anyone has insight to the process it would be interesting to read about.

thanks

 

He produces changes by convincing a large portion of the shareholders to side with him in those situations i.e. a proxy fight. Icahn, Ackman, etc. go into companies that have been operating inefficiently, have hidden assets, manage the company in a way that takes advantage of shareholders, etc. and convince the stakeholders. The battles can be simple majority-wins voting situation regarding dividends and buyback policies, etc. or can be long drawn-out trying to replace the board of directors.

Essentially, they pick their battles to ensure that they can effectively act as catalysts for instigating big changes to the company via. operations, governance, management, capital structure, etc.

 

Activists typically don't really need to get an actual majority on their side. Boards / managements are human and most will listen if the activists start to get even a significant minority on their side - you have to be pretty brave / stupid to want to flirt with the prospect of going to proxy battle and losing your cushy multi-million dollar paying job. Guys like Icahn/Ackman/Loeb tend to get support pretty quick as well once they announce their decisions because of all the HFs who try to copy the trade. Activism is a bit of a self-fulfilling prophecy when you're that big.

 

Check-out the Activist Investor - it has a lot of resources and best practices. They also have a great blog: http://www.theactivistinvestor.com/The_Activist_Investor/Home.html

For a list of the top activist hedge funds, who employ a range of activist approaches, check-out: http://www.hedgetracker.com/article/Top-Activist-Hedge-Funds-close-in-o…

 
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