Inside The Buy-side® 3Q13

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www.corbinperception.com

INSIDE THE BUY-SIDE®

THIRD QUARTER| ISSUE DATE: JULY 16, 2013

Equity markets continued their march higher

during the second quarter and while Fed

Chairman Ben Bernanke’s allusion to potentially

tapering QE during the second half of 2013

temporarily slowed market momentum, all major

indices realized gains. Specifically, the S&P 500

finished up 2.4%, the Dow closed 2.3% higher

and the NASDAQ added 4.2%. Meanwhile, the

Russell 2000 index, a barometer for small-caps,

advanced 2.7%.

In our continual effort to be on the forefront of

quarterly market sentiment and expectations, we

conducted interviews with 30 investment

professionals globally and across multiple

industry segments and investment styles. In total,

participating institutions manage $860 billion in

equity assets.

Given the strong start to 2013, it is not surprising

that the prior quarter’s surge in investor

bullishness has waned. In looking at the broader

themes, investor sentiment has retrenched to first

quarter 2013 levels, with 57% of contributors

again describing their current sentiment as

cautiously optimistic. While many point to

improving housing trends and lower

unemployment in the U.S., the largest overhangs

remain U.S. fiscal policy uncertainty and tepid

growth both domestically and internationally.

While investors seem to be enjoying the bullish

equity market environment, there is an underlying

current of concern as to its sustainability and the

view that there really are no suitable investment

alternatives to equities at this point.

Regarding views on the upcoming quarter,

sentiment has shifted modestly from 1Q13 trends

with surveyed investors now forecasting 2Q13 to

be below forecasts. As one investor opines, “I am

optimistic about the second half of the year but the second quarter will be a bit of an air pocket”.

Investment Style

Core Value | 33%

Core Growth | 20%

Growth | 17%

GARP | 17%

Hedge Fund | 10%

Sell Side | 3%

Sector

Generalist | 43%

Technology | 17%

Multi| 14%

Materials | 7%

Consumer | 7%

Healthcare | 3%

Energy | 3%

Industrials | 3%

Transportation | 3%

Geography

North America | 63%

Europe| 27%

Asia | 10%

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Key Trends

78% of surveyed investors report that 1Q13 earnings results were in line with expectations as

positive surprises outweighed negative ones

46% are forecasting 2Q13 earnings to come in below expectations

– Anticipate a sequential reduction in 2Q13 free cash flow, EPS and, to a lesser extent,

organic growth

– Reveal they will be acutely focused on business trends, top-line growth, balance sheet

strength and management outlook and guidance

Similar to last quarter’s findings, the vast majority, or 71%, identifies the Fed monetary

policy as the primary driver of the market’s significant rally

– 43% also point to the lack of alternative investment opportunities (e.g., fixed income)

as a contributor

Contributor opinions regarding monetary policy vary; 33% expect a shift within the next six

months, in line with Bernanke’s comments provided in mid-June

– Investor sentiment is fairly mixed as to what the market's reaction will be

For the second consecutive quarter, management tone is viewed as “less negative”

– Investors typically agree that “managements are trying to keep a lid on expectations”

and, as a result, are “giving quite conservative guidance”

Top investor concerns include the ripple effect driven by a slowing Chinese economy and, to a

lesser extent, prolonged European issues

Despite tempered growth, investors remain bullish on Latin America with 88% agreeing Mexico

is in a period of resurgence

For the sixth consecutive quarter, dividends remain surveyed investors’ top preference for uses

of excess free cash

– While share repurchases have historically been a close second to dividends, interviewed

contributors ranked reinvestment as a higher priority

Sustainable competitive advantages, followed by demonstrated shareholder-friendly capital

allocation and a strong management team are viewed as top investment differentiators

Regarding shareholder activism, while it depends on the type of campaign and motives,

surveyed investors report they are generally in favor of such measures

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71%

43%

14%

Fed Policy

Risk/Reward

Improving Fundamentals

Rally Drivers

Fed Bobbing-and-Weaving Cannot Stop the Momentum

Equity markets continued to rally as second quarter performance was again spotlighted by record

highs. For the S&P 500 and NASDAQ the all-time high closings took place on May 21, while

the Dow hit its best close a week later on May 28. In total, the major indices were not able to

outpace first quarter double-digit gains, however, all three finished in positive territory.

When polled regarding rally drivers,

investor opinion remained unchanged

from the prior quarter, with 71% pointing

directly to the Fed. Given Bernanke’s

mid-June comments regarding potential

tapering of the QE program and the

subsequent decline in the markets,

investors are nervous as to what is truly

driving market performance. As one

contributor comments, “It illustrates a

major risk in the market that the recent

move we had may not be due to fundamentals; rather, it may just be due to the perception the

Fed is going to provide liquidity and support”.

Furthermore, investors identify a lack of investment alternatives as a contributor to the 2013 run-

up. With interest rates at historically depressed levels, investors have turned their eye to the

equity markets in an effort to secure higher returns.

“It is financial repression. It is ultra-low bond yields. Bond investors are finally

waking up to the fact that just getting paid a yield of something nominal like 1% to

2% on fixed income products is not going to be a sufficient rate of return for the next

5 or 10 years.” – Growth, Generalist

“Certainly in the U.K. there has been a dearth of new issues, whereas the actual

money going into the unit trusts and pension funds has continued to increase and

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2Q13 Market Performance

S&P 500 + 2.4% DJIA + 2.3% NASDAQ + 4.2%

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1Q13 Earnings Results - Take Away

In-line | 78%

Below Expectations | 22%

2Q13 Earnings Results - Forecast

In-line | 38%

Below Expectations | 46%

Above Expectations | 15%

therefore there is a slight demand/supply imbalance at the moment. The other thing

is that the yield on the market compared to what you can get on cash and vested

bonds is still very attractive. There is a slight view that people are feeling a little

more positive towards the economy, as well as towards their spending and savings

and they are trying to find an outlet for that. That outlet is probably going to the

stock market rather than the bond market where the yields are very poor.” – Core

Growth, Oil and Gas/Services

“For the moment, it is driven by Bernanke’s comments and central banks rather than

the underlying fundamentals.” – Core Value, Consumer Discretionary

“I think part of it is real in the sense that low interest rates have been driving money

into the equity market.” – GARP, Generalist

2Q13 Results Anticipated to Fall Short of Expectations

The majority of contributors, or 78%, revealed

that 1Q13 results came in largely in line with

expectations. The only industry-specific

participants identifying last quarter’s performance

as subpar were technology-focused, citing “top-

line misses”.

Expectations for the second quarter vary though

contributors largely agree that there will be top-

line pressure. The point of contention, however,

is to what extent pricing power and improved

margins can offset weaker revenue. Drilling

down, of the group expecting generally weaker

results, 50% are generalists while 33% are

technology-dedicated.

For the quarter, investors report an acute focus on:

Business trends

Top-line growth

Balance sheet strength/liquidity

Management guidance

Expense control

“Revenues are increasing albeit slowly and margins are coming back slowly.” – Hedge Fund, Generalist

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Management Tone -- Prior Quarter

Unchanged (Cautious) | 33%

Less Negative | 33%

More Negative | 28%

Depends | 6%

Management Tone -- Current Quarter

Unchanged (Cautious) | 35%

Less Negative | 47%

More Negative | 12%

Depends | 6%

“I will be focused on weakening currencies versus the U.S. dollar and, as a result, a

lot more foreign exchange rate volatility. I expect volume trends to continue to be

weak, unable to be offset by pricing and, as a result, top-line weakness.” – Core Value, Generalist II

“I believe you will see companies meet expectations again probably driven by

slightly weaker revenue but better margins. You will see a lot of the top-end

guidance cut or the range changed because most companies had banked on a pretty

strong ramp in the second half. It is the middle of June and they have not seen much

evidence that it is going to happen.” – Core Value, Industrials

Management Tone Continues To Soften

Nearly half of the study group, comprising mostly

sector-specific investors, maintain management

teams are increasingly resonating more

confidence in their conversations with investors

and are “less negative” albeit cautiously

optimistic. Those who maintain executive tone

was unchanged, mainly generalists, assert they

continue to be “cautious”.

This marks the second consecutive quarter where

executive sentiment is observed as improving. An

interesting note, prior to previous quarter findings,

the last time investors identified management tone

as improving was 1Q12.

“The executives I speak with see a mixed

outlook. U.S. is doing okay, Europe

continues to be poor but perhaps is slightly

better and China and emerging markets are

a big question mark.” – Hedge Fund,

Generalist II

“Recovery does seem to be coming through

in most of the industries that I follow. It is a muted recovery but it is coming through

and hence management is slightly more positive.” – Growth, Consumer/Media

“There was a period of optimism but they are becoming concerned as they get closer

to the second quarter that things are not really picking up the way they had led

people to believe. They are cautious.” – Growth, Generalist

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Improving Staying the Same Worsening

Timing of Fed Action

Unsure | 20%

Within 6 Mos. | 34%

6 to 12 Mos. | 20%

12 to 24 Mos. | 13%

Longer Than 24 Mos. | 13%

Call on Performance Metrics: Sequential Decline

In our quarterly channel check on performance metrics, investor expectations for a weaker

quarter has resulted in views that FCF and EPS growth are likely to worsen. To a lesser extent,

organic growth is predicted to decline as well.

To Bail or Not to Bail…Taper Tantrum Scares Markets

After a fast-paced start to 2013 it was neither

fundamental nor geopolitical uncertainty which

halted market momentum. After the June 18 - 19

FOMC meeting, it was disclosed that the Fed

intends to taper its bond purchasing program

during the second half of 2013, reducing the

dollar amount of bonds purchased monthly to $65

billion from $85 billion. This threat of tapering

drove the S&P 4% lower in the two subsequent

trading days.

While investor views vary on when it will actually occur, 34% are taking the Fed’s words to

heart and predicting the easing will occur during the back half of 2013. Still, they are quick to

note that U.S. economic data will play a significant role in that decision.

“In terms of actually increasing the federal funds rate, it is two to three years away.

In terms of tapering QE, we agree with the current consensus that it could be the

third or fourth quarter of this year. That is very much dependent on the state of the

economy. If there are any signs that the U.S. economy is sliding backwards then we

would expect the Fed to push that tapering back into next year or whenever the

recovery looks more solid.” – Growth, Consumer/Media

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4Q12 1Q13 2Q13

Organic Growth

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4Q12 1Q13 2Q13

EPS Growth

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4Q12 1Q13 2Q13

FCF Growth

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Subsequent Market Reaction

Unsure | 17%

Neutral | 33%

Positive | 25%

Slight Pullback | 25%

“In terms of raising interest rates, I do not think any of that is likely for at least one

to two years. In terms of tightening, I could certainly imagine that happens by the

fall.” – GARP, Technology

“They have already stated they are hoping to do it by year-end but what will drive it

is how strong the economy is. If you believe the economy is going to stay strong then

probably by the end of the year they will start to slow down bond purchasing.” – Growth, Healthcare

Meanwhile, investors report the economic indicators on which they are most focused include:

77% | Employment

46% | Housing data, including starts, sales and mortgage rates

31% | Industrial production, including ISM and PMI

23% | GDP

18% | Growth prospects

Contributor views on the market’s subsequent

reaction to monetary tightening are just as varied.

While 33% state it will be neutral “because it is

somewhat expected”, 50% are at either extreme,

with half of this group predicting a rally and the

other half forecasting a slight pullback.

“I am very concerned about whether the

Fed can do this without a hiccup and I

suspect that they cannot and that there will

be problems ahead.” – Growth, Generalist

“Assuming the economy continues to improve, which would be the reason for pulling

back on the stimulus, I think it will be a positive reaction. In my opinion, they are

floating trial air balloons and allowing people to get used to the idea so 6 to 12

months out when they actually pull the trigger there is not going to be this big shock.

People will have vetted the idea, talked about it and worked through it.” – Core

Value, Materials II

“I do not expect much impact at all. The Fed will indicate very clearly when it is

going to begin tapering so when it arrives it will be fully discounted in the market.” – Growth, Consumer/Media

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China's Impact on Global Growth Over the Next 12 Months

Positive | 64%

Negative|18%

Neutral | 18%

Concerns Regarding Europe Take Backseat to Asia

Investor concerns are largely focused on the

international landscape, specifically Asia. Indeed,

participants highlight the slowdown in the

Chinese growth rate and the ripple effect it could

have on the global economy. As an investor

avers, China has been “the locomotive for the

world economy for the last several years”, adding

“to the extent that its growth slows, and it is

slowing, that could be quite negative for the world

economy”. Despite these concerns, 64% of

surveyed investors report that China should have a

positive influence on global growth over the next 12 months. On the theme of Asia, 21% express

concerns over Japan potentially entering into a recessionary economy despite the stimulative

policies of Abenomics.

While there was no major headline news coming out of Europe during 2Q13, the persistent

“babbling in the background” continues to weigh on sentiment albeit at a much less extent than

previous findings. The majority, or 72%, report they are mindful of the issues but note “Europe

will continue to struggle for a couple of years…so it is not a headline risk at this point”. In that

vein, 42% suggest the subdued economic activity will last three to five years while 33% predict

it will recover in one to two years’ time. In general, top concerns center on negative growth and

uncertainty of the EU.

While the U.S. remains a relatively bright spot when compared to the rest of the world,

continued concerns about tepid growth and medium-term changes to Fed policy leave some

surveyed investors apprehensive.

Top Investor Concerns

3Q12

China Slowdown

European Crisis

Fiscal Cliff

U.S. Equity Valuations

Violent Unrest

4Q12

Fiscal Cliff (Partially Resolved)

Washington Policy, Brinkmanship

European Crisis

Challenging Macro/Muted Growth

Global Political Unrest

1Q13

Washington Policy; QE

European Crisis

U.S. Equity Valuations

Revenue Growth, Margin Expansion

Global Political Unrest

Current

Chinese Slowdown

Japan Monetary Policy, Growth

European Crisis

U.S. Economy

Changes in Fed Policy and Reaction

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“We have issues in Europe and Japan and now China and Australia that need to go

through the business cycle. Japan has been a perennial issue; for them, growth is

just anemic. I would say international GDP growth is really the primary concern

outside the U.S.” – Hedge Fund, Generalist

“I am hearing more about the Chinese banking system. If that blows up in a noise-

making way, it will not have much direct impact on the U.S. economy but, at the

same time, sentiment will roll over. Economic growth is somewhat being driven by

improving confidence so if that gets hurts it could have a negative ripple effect in

housing and other places.” – Core Growth, Generalist II

“I am concerned about the U.S. unemployment and inflation numbers. Another

concern is the strength of the Chinese economy. They have been revising down their

GDP growth estimates. They have been allowing overnight interbank interest rates

to creep up, suggesting the credit expansion will be limited and that keeping inflation

under control is now becoming more important than flat-out economic growth. This

has huge implications for GDP. What that could mean for exports and funds

available in China to continue buying U.S. treasuries has very vast implications.” – Core Value, Generalist II

Despite Fits and Starts, Investors Remain Bullish on Latin America

Surveyed investors closely monitoring Latin America markets report that while Brazil “is

starting to struggle” and growth is slowing, they remain bullish on the region overall. Indeed,

46% suggest that “medium- to longer-term economic growth prospects remain very good:

despite “structural concerns” and “hot money flying into the region”. As an investor points out,

“emerging market growth is never quite as fast as it has the potential to be”. In addition to

Brazil, investors are focused on Argentina, Chile, Venezuela and Mexico.

Digging deeper, 88% agree that Mexico is entering a period of resurgence and highlight “the

change in government”, “stronger U.S. economy” and along these lines, “manufacturing

advantage over China” in that it is now the lower cost country of the two.

“Two worries for Brazil are the weakness in both the currency and commodity

prices. Brazil is trying to regain a more balanced economy. There are big sources

of stimulus and you also have the idea that it might try to go self-sufficient in

energy. This year still looks a bit subdued for the Brazilian economy but 2014 will

be positive. I see close to 2% for Brazilian growth this year but double it next year,

4% and maybe even 5%.” – Core Growth, Oil and Gas/Services

“I am positive about Latin America because the economies there are growing pretty

robustly. In addition, the World Cup is there next year and the Olympics in 2016.

That area of the world will probably continue to grow.” – Growth, Healthcare

“We are very interested in the Latin American consumer. You are still seeing a very

quickly growing middle class. Taking into consideration all of the consumer data we

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Investor Sentiment -- Prior Quarter

Bullish | 42%

Neutral | 29%

Cautiously Optimistic | 25%

Bearish | 4%

Investor Sentiment -- Current Quarter

Bullish | 10%

Neutral | 29%

Cautiously Optimistic | 47%

Bearish | 14%

follow, Latin American sales continue to remain healthy. This is driven by Brazil,

Chile and so forth. It is looking like strong long-term growth out of there.” – Core

Value, Consumer Discretionary

Market Sentiment: Raging Bulls Retreat

With U.S. indices seemingly outperforming the

pace of the economic recovery, investor

bullishness has been tempered. After heightened

optimism during 1Q13, in which 42% of

interviewed investors identified themselves as

“bullish”, the level has now declined to roughly

10%. Despite the relative change in sentiment,

the global investor remains positive with the

nearly half of this group citing cautious optimism.

In terms of investment themes, adept capital

deployment remains a leading thesis with 50% of

surveyed investors asserting they are “looking for

companies that re-deploy capital and can earn a

good return on that”. Other one-off themes cited

include cyclicals, operational efficiency and

“long-term trends driven by demographics from

emerging consumers”.

“We expect more volatility. Equity

valuations have moved up but the equity

risk premium is still a little too high

compared to interest rates. We are still

looking for a higher market by year-end but not that much higher.” – GARP,

Generalist

“I am frightened, bearish even. The liquidity injections have been critical to driving

the market higher. If you get a sense that will be moderated or taken away, it will

make for a more difficult market environment.” – Hedge Fund, Generalist II

“I am cautiously optimistic. We are at the bottom looking up, certainly in terms of

the U.K. economy. We are not going to race ahead and get 3% growth anytime

soon. It is going to be very much a stop-start type of situation because the banks are

still not lending very much. The lending in the U.S. has improved somewhat but we

have to be careful; the comps are going to get difficult because the second half of

last year was very strong for the U.S. economy. Fed meetings are very important

and Mr. Bernanke has to play his cards properly. If he thinks the economy is strong,

he may actually make a mistake. Overall, the global economy is still in a recovery

mode. Things will tick along nicely but not actually race ahead and that is probably

quite good in terms of inflation.” – Core Growth, Oil and Gas/Services

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71%

29% 24% 29%

6%

57%

50% 43%

29%

0%

53% 47%

32% 26%

0%

73%

40%

67%

7% 0%

Dividends Buybacks Reinvestment M&A Debt Reduction

Free Cash Flow Preference - Quarterly Trends

3Q12 4Q12 1Q13 Current Rolling 12 Month Avg.

Sector Snapshot

Declining Appetite for Buybacks Continues; Strong Resurgence in Reinvestment

For the sixth consecutive quarter, dividends top the list when polling investors on their

preference for uses of excess cash. The gap between dividends and buybacks widened

drastically during the quarter, likely driven by the run-up in equities. Consequently, a large spike

in favor of reinvestment was recorded, increasing to 67% from 32% in the prior quarter.

The general view on share buybacks is that it is “nearly impossible to time them right”, with

surveyed investors suggesting that companies should have a plan in place and maintain steady

activity regardless of the stock price. Continuing, this group reveals that they typically do not

give management much credit when it comes to “calling” the market and given that many

companies are trading at or near recent highs the penchant “by far, is reinvesting in the

business”.

“I would rather they look at long-term projects. If that does not look like a viable

option, share buybacks or dividends are fine. I certainly do not like seeing cash pile

up on balance sheets.” – Core Value, Materials II

Bearish Neutral Bullish

Healthcare

Aerospace

Energy

Technology

Telecom

Financials

Industrials

Materials

Cons. Disc.

Media

Utilities

Paper and Pulp

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“That depends what opportunities they have. If you can invest at a higher return,

then keep it all. If you cannot then have a dividend with a reasonable payout that

lets you continue to fund what you need and then grow it consistently over time.

Then use buybacks as your swing capacity.” – Core Value, Industrials

“If there are investment opportunities available that are attractive and will deliver

decent returns then clearly that is the best use of excess cash flow. In the absence of

those opportunities, we tend to feel returning cash to shareholders is the best option.

I do not have a particularly strong view on dividends or share buybacks. The only

thing I will say about share buybacks is they tend to be most beneficial if a company

has a consistent program rather than one that goes for short, sporadic periods.

Inevitably, the times when companies have sufficient cash available to buy back

shares tends to coincide with the times when the share prices are near cyclical highs.

More often than not, you find that companies buy back shares at the worst moments.

Therefore, we feel if a company cannot buy back shares regularly they are best

returning excess cash in the form of dividends.” – Growth, Consumer/Media

“In almost all cases I would rather see a business invest in high return projects

within their core competencies. That is always our first preference. The problem

has been that many businesses have not had ample opportunities to deploy capital in

that manner. Once you have invested in the business, then start to think about share

repurchases and dividends. I hate to see companies lever up to pay a dividend or

repurchase shares. Managements rarely have shown the ability to buy back stock at

attractive prices.” – Growth, Generalist

Outside Fundamentals, Sustainable Competitive Advantages Leading Investment Factor

Respondents assert that when researching investment opportunities, the following elements

weigh heavily in their decisions and can serve to differentiate a company from the masses:

71% | Sustainable competitive advantages (e.g., franchise strength, high barriers to entry,

low government regulation, consistent innovation, leading market position, etc.)

47% | Management quality

29% | Capital allocation track record, ROIC

24% | Cash flow generation

18% | Growth prospects

“I always focus on a company’s competitive advantages. I want to know what the

source of that competitive advantage is and why it is going to be sustainable in the

future. I try to avoid businesses that have commodity exposure or very high industry

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rivalry issues because it makes returns less stable and less predictable in the future.

I try to buy businesses for our portfolios and recommend them more broadly within

the firm when not only I can identify what the sustainable competitive advantage is

but also when the firm is trading at a significant discount to such that my investment

has a margin of safety built into the price I am paying.” – Growth, Generalist

“FCF is clearly a factor we look at, as is cash conversion. Keeping the cost of

capital down, keeping CapEx in line with expectations and not spending too much is

important. Having a mentality of evolution rather than just standing still is critical,

too. Controlled diversification is also important.” – Core Growth, Oil and

Gas/Services

“I look for industry leaders with strong ROIC and FCF generation.” – Core Growth,

Consumer Discretionary

IR Best Practice: Be Aware of Shareholder Activism and Put a Plan in Place

As shareholders increasingly continue to hold boards of directors and managements more

accountable for company performance and corporate governance practices, the rise of activism

continues to gain momentum. Recently, there has been a significant increase in activist funds,

including Corvex and Marcato, and activism has emerged as a legitimate asset class. To a

greater extent, conventional investors are teaming up with activists surreptitiously and supporting

their campaigns to unlock value.

The most common activist campaigns include:

Portfolio (e.g., break-up, spin-off)

Governance

Reorganizations/management

Balance sheet/capital structure

In general, surveyed investors are universally in favor of shareholder activism though 36% add

the caveat that “it depends on the situation”. Indeed, while some activists have broader

shareholder interests in mind and can serve as the catalyst for much-needed change, others are

self-motivated and are looking “to create a short-term gain”, contributors assert. Several note

that while it is warranted in certain situations, activism can serve as a distraction to both

management and the mainstream investor community and often results in a trading mentality

“more focused on headlines than the underlying business and fundamentals”.

Headline Activists of Late (in alphabetical order)

1. Atlantic Investment Management (Alex Roepers)

2. CalSTERS

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3. Corvex Management (Keith Meister)

4. Elliott Management

5. GAMCO Asset Management (Mario Gabelli)

6. Greenlight Capital (David Einhorn)

7. Icahn Associates (Carl and Brett Icahn)

8. Jana Partners (Barry Rosenstein)

9. Marcato Capital Management (Mick McGuire)

10. P. Schoenfeld Asset Management (Peter Schoenfeld)

11. Pershing Square Capital Management (Bill Ackman)

12. Relational Investors (Ralph Whitworth)

13. Sandell Asset Management

14. Southeastern Asset Management

15. Starboard Value (Jeff Smith)

16. Stilwell Value (Joseph Stilwell)

17. The Blackstone Group (Stephen Schwarzman)

18. Third Point Management Company (Daniel Loeb)

19. Trian Partners (Nelson Peltz)

20. ValueAct Capital Management (Jeff Ubben)

IROs should adopt a proactive approach to addressing increased shareholder activism in the

event they are met with opposition. Selected best practices include:

Ensure that your senior management has in place both a prevention and reaction strategy

Know your shareholder base and which mainstream investors have activist tendencies (e.g.,

Glenhill Capital, Perry Capital, QVT Financial, Seneca Capital, etc.)

Consistently check in with significant shareholders and listen to their concerns/issues

Monitor peer performance and how your company stacks up on key metrics

If a known activist reaches out, take it seriously and be on the offensive

– A lack of subsequent contact does not mean the activist has moved on; rather, they

are often preparing their campaign and priming other shareholders

Communicate the key priorities of management, realistic benchmarks and milestones that

shareholders can use to evaluate progress

When asked what advice they would give managements who have been approached by an

activist, surveyed investors universally recommended, “Listen and consider what they are

saying”.

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advisory firm assisting public companies with

driving long-term shareholder value.

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We are passionate about what we do and develop relationships that are collaborative and long

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Inside The Buy-side® 3Q13