O'Melveny's Scrivano Quoted in Daily Journal on Shareholder Activism

April 07, 2014

O’Melveny & Myers partner Paul Scrivano was quoted in Daily Journal’s April 7, 2014, article “Corporate Attorneys Survey New Tactics Against Activists.”  The piece notes that legal advisers are urging corporate clients to focus on communication when preparing for run-ins with activists.  "If you're speaking with shareholders on an ongoing basis and keeping them involved as to 'here's the plan,' you're much more likely to have a receptive ear when an activist comes knocking," Scrivano said, referring to the strategy of making a concerted effort to connect with shareholders regularly.

A trend among activists noted in the article is the exercise of appraisal rights, which involves asking a court to evaluate the fair market value of the acquisition of a company in which they own stock.  Scrivano told the publication he believes the growing use of appraisal rights is likely to affect the way attorneys negotiate acquisition term sheets in public company deals.  "That condition will be focused on a lot more by M&A practitioners if the thought here is that hedge funds might seek to exercise appraisal rights and hold a deal up," he said.

Scrivano also commented on litigation currently before a Delaware judge alleging that Sotheby's poison pill structure, which limits "active" investors to 10 percent stake in the company, is unfairly discriminatory.  "The whole reason the pill has teeth is because of that discriminatory feature," he said.  "Every so many years, it feels like the pill gets litigated, but it continues to hold up.  I think the smart money is on the pill being upheld."

Scrivano is co-head of O'Melveny's Mergers & Acquisitions Practice in the US and divides his time between the Firm's New York, San Francisco and Silicon Valley offices.