MAGAZINE - Realview

NEWS
“Green shoots” wake corporate predators
Corporate directors would do well to prepare for a rise in unsolicited takeover offers.
NEW YORK: There may be signs of so-called “green shoots”
in the economy, but one of them does not necessarily bode well
for all boards of directors. Indeed, a sharp rise in unsolicited
takeover offers in the US means many may now have to confront
the very real disruption and distraction that results from a
predatory threat to ownership.
Hostile offers accounted for 47 per cent of the M&A transactions
that took place in the United States during the first
few months of 2009, compared with 24 per cent in all of 2008
and just 7 per cent in 2004, according to a report from the
Conference Board Governance Center (CBCC).
“Today’s market conditions permit some companies to be
‘put in play’ more easily than before,” said the author of the
report, Frederick Alexander.
The concern particularly applies to companies with undervalued
stock prices, surplus assets or constrained performance
– often resulting from short-term liquidity issues – that invite bargain-hunting
by acquirers capable of obtaining financing or using
their equity currency to pursue growth opportunities.
“Over the past few years, in response to pressures from
proxy advisory groups and activist shareholders, some of those
companies have reduced their structural takeover protections
by repealing poison pills and declassifying boards, and may
now be particularly vulnerable,” Alexander said.
The report, titled The role of the Board in Turbulent Times:
Responding to Unsolicited takeover Offers, encourages directors
to become familiar with the corporation’s governance profile
and the tactics that can be used to protect shareholders’ interests
from opportunistic behaviours in the marketplace.
“The tactics discussed in the report are not about thwarting
unsolicited offers,” Alexander emphasised. “They are about
ensuring that directors are given enough time to fulfil their fiduciary
obligations and obtain the information necessary to
make a rational business decision with respect to the offer, as
well as to explore all alternatives.”
Recommendations in the report include: reviewing existing
organisational (charter and bylaws) provisions; monitoring shareholder
base and intentions; maintaining proactive external relations;
and understanding how investors and gatekeepers
(proxy advisors and governance rating agencies, in particular)
could perceive and react to possible amendments to the company’s
governance profile.
IT risk solution for pandemic
The alarming spread of so-called Swine Flu has prompted one software developer to adapt
an existing governance, risk and compliance solution to help organsiations better maintain
business continuity in face of the pandemic.
NEW YORK: US-based Modulo, a provider of
IT governance, risk and compliance solutions,
has adapted its software product, Modulo Risk
Manager, to help private and public institutions
deal with the current Swine Flu pandemic.
Modulo Risk Manager was first applied in a
pandemic-like scenario when it was implemented
by one of Brazil’s biggest banks, Banco Real
(part of Santander Group), during the Avian Flu
outbreak in 2006. The software was adopted as
a tool for internal risk management and a solution
was developed to support the necessary decisions
in the event of wholesale contamination.
Essentially, it automates the process required
for minimising the risks of contamination through
providing checklists, graphs, and maps in order
to prevent and protect a business and its customers
from potential damages and resulting
losses, thereby helping protect organisations
from the impact of possible epidemic scenarios
and providing business continuity solutions.
“In the case of the contamination threat of influenza
A, organisations which adopt a preventative
strategy together with good business practices,
can return to their core activities much more
quickly after a crisis situation,” said Modulo cofounder
Alvaro Lima.
“Unfortunately, many organisations cannot
return quickly and effectively to their activities
after such a global crisis.”
“In the case of the
contamination threat
of influenza A,
organisations which
adopt a preventative
strategy together with
good business practices,
can return to their
core activities much
more quickly after a
crisis situation”
8 RISK August 2009