As activists consider their plans for the rest of this year and next, we revisit some earlier guidance about how to think about universal proxy...

The Five Big Decisions for Activists Under Universal Proxy

We've seen a couple of practical guides to using the universal proxy card, including the useful Olshan roadmap. We wrote our own, hitting the highlights, earlier this year.

It's a new regulation, and there are many, many things for an activist investor to consider, although the color of the proxy card probably isn't one of them anymore. Lots of decisions, big and small - how to format proxy cards, where to host virtual proxy materials under notice-and-access, when to drop news releases, and all the rest. 

Here, we identify the five most significant decisions an activist will need to make. Yes, activists have always needed to make these, and now UPC makes them much more critical.

1. Size of slate: This is perhaps the most critical decision. Done right, an activist can prevail before things even get going. We suggest using a strategy model with expected shareholder support as the principal input. It then determines how that support translates to number of seats an activist can expect to win, and thus how many to nominate. There are two related decisions: whether to seek a majority or more, and how to handle a classified BoD. A majority depends on a thorough understanding of what shareholders (and proxy advisors like ISS and Glass Lewis) will think about granting control without paying a control premium. The strategy model can accommodate this constraint easily. A classified BoD affects size of slate, too, and interacts with the decision about whether to seek control. In short, UPC makes it easier win all of the seats in a class, without seeking control, again depending on expected shareholder support.
2. Which candidates: The second most critical decision. The personal nature of elections under UPC makes candidate qualifications more relevant than ever. An activist should recruit candidates that directly and clearly support its thesis and plan for the company. Each candidate should also compare well to individual company incumbents, since shareholders will vote specifically between them.
3. Budget: This was always important, and UPC makes it even clearer. UPC helps an activist understand the baseline, minimum cost for a solicitation. The activist can then work with its advisors to understand the additional impact of more spending on votes.
4. Promotion and solicitation plan: how to work with solicitor to help shareholders to convey thesis and plan, and compare each activist nominee to a specific incumbent. An activist can ask shareholders to support as many nominees as they wish, rather than merely asking them to support their entire plan and slate.
5. Timing: When to begin, in light of the notice schedule, and the possibility of multiple activists