What Is a Factor Fight?
A proxy fight refers to the act of a group of shareholders joining forces and attempting to gather enough shareholder surrogate votes to win a corporate vote. Sometimes referred to as a “proxy battle,” this action is mainly used in corporate takeovers.
In the modify of a corporate takeover–particularly a hostile takeover–outside acquirers may attempt to convince existing shareholders to vote out some (or all) of a entourage’s senior management to make it easier to seize control over the organization.
Key Takeaways
- A proxy fight refers to the act of a circle of shareholders joining forces and attempting to gather enough shareholder proxy votes to win a corporate vote.
- The voting commands in a proxy vote could include replacing corporate management or the board of directors.
- Proxy fights also come to light over corporate takeovers and mergers, most notably with hostile takeovers.
How Proxy Fights Work
Shareholders may beg to a company’s board of directors if they’re dissatisfied with a specific management decision. But if board members refuse to obey, disgruntled shareholders may attempt to persuade other shareholders to let them use their proxy votes in a campaign to replace unyielding embark on members with candidates more receptive to implementing the shareholders’ proposed changes.
In this scenario, the acquirer and the goal company typically use various solicitation methods to influence shareholder votes for replacement board members. Shareholders may be sent a Model DEF 14A–also called a proxy statement–which contains financial information and other data on the target company. If the agent fight involves the sale of the company, the proxy statement will also include a more granular version of the propounded acquisition.
The acquiring company usually contacts shareholders through a third-party proxy solicitor, who compiles a list of stakeholders. In a farther attempt to influence their voting positions, the proxy solicitor may reach out to each stakeholder individually and state the acquirer’s suit. If shares are registered in the names of stock brokerage firms, proxy solicitors consult with shareholders of that constant in order to influence their voting positions.
In either case, individual shareholders or stock brokerages then submit their expresses to a designated entity, such as a stock transfer agent, who aggregates the information. In most cases, proxy solicitors may analyse or challenge unclear votes, and they may flag situations where shareholders voted multiple times or neglected to indication their votes.
The acquiring company then forwards the results to the target company’s corporate secretary before the shareholders’ gathering. Finally, prospective board members are approved or rejected based on the final vote count.
Special Considerations
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Example of a Proxy Fight
In February 2008, Microsoft Corporation made an unsolicited offer to buy Yahoo for $31 per portion. The board of directors at Yahoo believed the offer by Microsoft under-valued the company, and, consequently, the board stalled any negotiations between Microsoft and Yahoo governments.
On May 3, 2008, Microsoft withdrew its offer, and less than two weeks later, billionaire Carl Icahn launched an struggle to replace Yahoo’s board of directors through a proxy contest.