Am I Next? Activist Investors Change Restructuring and Layoffs

Once again we are reminded that Wall Street gunslingers, now renamed “activist investors,” are usually the precursor to change. Precipitating organizational restructuring and layoffs to satisfy the self-serving agenda of large investors with short-term exit strategies.


A relevant portion of the legendary Gordon Gecko speech from the 1987 movie Wall Street …

Am I Next? Gordon Gecko Speech from Wall Street

“Teldar Paper, Mr. Cromwell, Teldar Paper has 33 different vice presidents, each earning over 200 thousand dollars a year. Now, I have spent the last two months analyzing what all these guys do, and I still can't figure it out. One thing I do know is that our paper company lost 110 million dollars last year, and I'll bet that half of that was spent in all the paperwork going back and forth between all these vice presidents.

The new law of evolution in corporate America seems to be survival of the unfittest. Well, in my book you either do it right or you get eliminated.

I am not a destroyer of companies. I am a liberator of them!

The point is, ladies and gentleman, that greed -- for lack of a better word -- is good.

Greed is right.

Greed works.

Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.

Greed, in all of its forms -- greed for life, for money, for love, knowledge -- has marked the upward surge of mankind.

And greed -- you mark my words -- will not only save Teldar Paper, but that other malfunctioning corporation called the USA.”

Of course, as the movie develops, you see the corruption, the trading on insider knowledge, and the realization that Gecko cares nothing about the companies or its employees beyond his return on investment.

Not so far from real life where the same coercive forces are driving change in a number of large and medium-sized corporations.

Honeywell International follows Third Point Capital’s agenda …

Honeywell International Inc. said Tuesday it will pare its focus to four business lines, including aerospace, and spin off two businesses with $7.5 billion in revenue to help fund acquisitions.

The reorganization, which reduces revenue by about 18 percent, will simplify Honeywell’s broad portfolio, boost growth and give shareholders a tax-free benefit from the new companies, Honeywell Chief Executive Officer Darius Adamczyk said on a conference call on Tuesday. It also gives the diversified manufacturer scope to change its remaining portfolio along the lines sought by hedge fund Third Point Capital, which agitated for a spin-off of aerospace. Third Point said on Tuesday it was pleased with the changes and backed Adamczyk’s leadership, though it wants him to keep improving the portfolio. Adamczyk hinted at more to come, saying the two new businesses “can grow at an accelerated rate.” <Source>

GE Yields to Peltz's Pressure

General Electric added Edward Garden, chief investment officer of activist investor Trian Fund Management, to its board, responding to Trian's pressure for a more thorough restructuring. GE's share price has fallen nearly 20% since June and is now at a four-year low. The move came on the eve of a vote by Procter & Gamble shareholders on whether to appoint Trian CEO Nelson Peltz to the company's board, against the wishes of management. < Source>

Bottom line 

Stay awake, aware, and proactive.