What Are Cooperation Agreements?
Activist cooperation agreements (also called settlement agreements) are strategic alliances between activist investors and companies, typically reached through negotiations. These agreements are designed to address the concerns and objectives of both parties, aiming to avoid contentious (and sometimes expensive) proxy battles and litigation. Activist investors, who acquire significant stakes in companies with the intention of influencing their strategic direction or corporate governance, may enter into cooperation agreements to secure board seats, implement changes in management, or advocate for specific operational improvements. These agreements offer a middle ground where both activists and companies find common ground to enhance shareholder value and avoid prolonged and costly conflicts.
Why Should Investors Care?
Investors should closely monitor activist cooperation agreements as they can significantly impact a company’s trajectory and shareholder returns. Successful resolutions through cooperation agreements can lead to improved corporate governance, increased operational efficiency, and enhanced shareholder value. Conversely, failed negotiations or disputes may result in prolonged uncertainty, negative publicity, and potential financial losses for both parties involved. By understanding the terms and implications of these agreements, investors can make more informed decisions about their portfolios.
Examples of Activist Cooperation Agreements
For a quick look at previous activist cooperation agreements, you can see our article on the List of 2023 Activist Cooperation Agreements here.
Additional Resources on Activist Cooperation Agreements
- Think Twice Before Settling With An Activist – Summary of research by Kai H.E. Liekefett and Lawrence Elbaum (at the time both at Vinson & Elkins) on activist settlements with boards.
- Dancing with activists – July 2020 research paper on activist settlement agreements.
- Help! I settled with an activist! – Additional research by the Sidley team (including Kai Liekefett) regarding the risk