By David Benoit And Justin Baer
For months, Goldman Sachs Group Inc.'s activism-defense business
has been the butt of competitors' jokes.
"If you want to lose, hire Goldman Sachs," quipped Rob Kindler,
the head of mergers and acquisitions at the firm's arch rival
Morgan Stanley, at a conference in March.
Goldman Sachs, considered to the gold standard on Wall Street,
endured a pair of stinging defeats lately in its efforts to help
clients ward off activist investors. In May, auction house
Sotheby's opted to settle a bitter quarrel with Daniel Loeb, giving
the activist three seats on its board and paying him some $10
million for expenses. Darden Restaurants Inc., another client, lost
all 12 of its board seats to Starboard Value LP in October.
But the tables turned last week when Goldman--led by the firm's
head of defense William Anderson--helped DuPont Co. fend off
activist firm Trian Fund Management LP in a high-stakes,
high-profile battle.
The win has allowed Goldman to regain some bragging rights in
what is becoming one of Wall Street's most competitive arenas. As
activists become increasingly aggressive, advising companies on how
to defend themselves has become a niche, if not always lucrative,
business for many banks.
Banks that help companies defend against activists can win an
inside track for the clients' future deals later, where there is
real money to be made. For instance, Goldman Sachs last year
advised eBay Inc. in its fight with Carl Icahn and then won a
mandate to help eBay separate its PayPal unit.
And despite its public ribbing by Mr. Kindler, Goldman is still
the No. 1 firm in terms of being hired to help a company defend
itself against activists, according to FactSet, acting for eight
companies this year, including Macerich Co., retailer Children's
Place Inc., and retirement-home operator Brookdale Senior Living
Inc. In 2014, Goldman was also the most active, advising on 23
public campaigns. Among its historic wins were Clorox Co., Oshkosh
Corp. and AOL Inc.
Still, the advisers on many campaigns never come to light,
making it hard to measure one bank's performance against
another.
At Goldman, the job of leading the defense for DuPont and the
firm's other clients has fallen to 49-year-old Mr. Anderson since
2003. Mr. Anderson and his team report to the bank's heads of
global mergers and acquisitions.
When Mr. Anderson took the job, the business of advising on
activist-defense barely existed and hostile deals were slow. Other
bankers were reluctant to take such a job, afraid it wouldn't
generate much revenue, or yield them bonuses, people familiar with
the matter say.
But by tapping his legal background--he had previously been a
lawyer at Simpson Thacher & Bartlett LLP--Mr. Anderson began
monitoring regulatory filings that disclose when an investment firm
buys into a company.
Mr. Anderson studied previous campaigns to learn the tendencies
of activists, and he got to know them. He compiled detailed
dossiers on the leading activist investors, such as Mr. Icahn and
William Ackman, centralizing information that could be used by
fellow Goldman bankers.
A key to Mr. Anderson's approach, the people say, has been his
ability to help clients understand and better cope with activists,
who can wield tremendous power--even simply by doing a television
interview--and swallow management's time.
"As an activist, when Bill Anderson is on the other side, you
have to be on your toes," said Steve Wolosky, a lawyer for
activists at Olshan Frome Wolosky LLP.
In the case of DuPont, John Vaske, who has a long relationship
with DuPont as co-chairman of the firm's global natural-resources
group, worked closely with Mr. Anderson. DuPont was also advised by
bankers at Evercore Partners Inc. including Roger Altman, the
advisory firm's founder and a former deputy Treasury Secretary.
After Trian, led by Nelson Peltz, began its DuPont campaign
roughly two years ago, Messrs. Anderson and Vaske helped review
Trian's suggestions to break up the company and slash costs,
according to people familiar with the matter--moves that the board
largely rejected.
Mr. Peltz campaigned for a board seat and while some investors
questioned the danger of adding a single director from Trian, the
Goldman bankers helped to argue the case that as a director, Mr.
Peltz would be overly focused on a breakup to the detriment of the
company.
Influential proxy-advisory firms Institutional Shareholder
Services Inc. and Glass Lewis & Co. had recommended
shareholders elect Mr. Peltz to the board. DuPont was caught off
guard by the Glass Lewis decision and the Goldman bankers helped
prepare DuPont's management as it rushed to persuade large
investors who tend to agree with such recommendations.
"Goldman Sachs has been a longtime valued adviser," a DuPont
spokeswoman said. "We have benefited greatly from their ongoing
engagement as we have continued to build and position the
next-generation DuPont over the last several months."
While DuPont ended as a win for Goldman Sachs, many bankers say
that such victories may become increasingly rare across Wall
Street. Activists are becoming more sophisticated as they agitate
for change, making it harder for companies to swat them away.
"DuPont's victory is a notable exception to the growing trend of
activist victories," lawyers at Wachtell, Lipton, Rosen, &
Katz, long a Goldman ally, wrote to clients this week, adding the
campaign itself "underscores the challenges faced by all companies
dealing with activists in the current environment."
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