NEW YORK: The revelation that VNU's planned $7 billion acquisition of IMS Health would have to be scuttled in the face of a shareholder revolt was a rare occurrence in the world of such mega-deals.
But IR pros say that shareholder activism is on the rise, driven in part by hedge funds hungry for ever-rising profits.
This past July, VNU, a Netherlands-based information and media company, announced its agreement to purchase IMS, a Connecticut-based healthcare information firm. But the move provoked a strong negative reaction from a block of shareholders representing almost half of VNU's stock, who said the deal would not maximize value. Their opposition caused VNU and IMS to cancel the transaction this month.
Taylor Rafferty, the financial communications firm that handled VNU's portion of the proposed deal, did not return calls seeking comment.
Bill Hughes, head of corporate communications for IMS, declined to disclose whether his company had worked with an outside agency.
"Looking back, there are always things that you can do better, more effectively and efficiently, from a communications perspective - whether it involves your employees, the media, or your shareholders," Hughes said via e-mail. But he added that the company had met with "more than 400 shareholders and investors" to promote the deal, and noted that VNU shareholders had made it clear they would not support the deal by late September.
IMS will "continue to run our business independently," said Hughes. "We will also look for ways to add consumer insights and behavior into our existing products and offerings, and will continue to work with VNU in this area."
Lou Thompson, president and CEO of the National Investor Relations Institute (NIRI), said shareholder activism is on the rise, driven by large institutional investors. "Clearly companies need to pay a lot of attention to it. It's coming not just from the normal institutional activists," Thompson said, adding that within the IR community, "we've been talking about it a lot."
"As hedge funds look for returns, one of the things they have jumped on is shareholder activism," said Joele Frank, managing partner of Joele Frank Wilkinson Brimmer Katcher. "In the late '90s, boards and ... managers ... could do no wrong. Now they can do no right."
Although the VNU-IMS deal was an international one, IR professionals say that a similar scenario could certainly happen in the US in the current climate.