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Activist Spotlight: The Pros and Cons of Poison Pills, The Deal Pipeline

December 13, 2018

Keith Gottfried tells The Deal Pipeline that employing a poison pill itself can't stop an activist from launching a proxy solicitation or voting its shares. Influential proxy advisory firms Institutional Shareholder Services and Glass Lewis issue red flags urging investors to vote against most pills. According to Keith, 10% pills adopted without giving shareholders a future opportunity to ratify them are generally frowned upon by ISS, which will urge shareholders at companies with these mechanisms to vote against incumbent directors in uncontested elections at annual meetings. ISS generally won't issue a red flag if a company issues a pill with s 20% trigger, no more than a three-year term, and other provisions. If the pill doesn't meet all those conditions, ISS will recommend that shareholders oppose it.

Keith also reveals other unintended consequences of adopting a pill in response to an activist investor.

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