During his recent presentation at Faena Forum, Nelson Peltz discussed the first thing you do as an activist investor. Here’s an excerpt from the presentation:
Peltz: Our formula at Trian, and the formula that we invest is something I learned from my father who sold produce, and it’s on every coffee cup in our office.
And it’s really simple, it says sales up, expenses down.
When I learned that I dropped out of Wharton and figured that’s all I need to know, sales up, expenses down, and that works whether it’s a little produce company, like my father owned, or P&G where I just recently got off the board.
That’s what they all have to understand, sales up, expenses down, and we preached that and it seems so simple, they call McKenzie in and they call all these brilliant guys in to figure out where it’s going. And all they do is have to get a coffee cup for my office. That’s all they have to do.
They can take $25 million dollars a year on these consultants, what do these companies need to do to grow? What do they need to do?
Well let me tell you one of the things they need to do, they need people on the boards of these companies that are truly independent.
That have a vested interest. You know every board… I started my career building businesses and happily built a very large packaging company and fixed up Snapple and did a bunch of fun things.
And then I became what’s called an activist investor. And it was really simple, you get into these companies and the first thing you do when you walk into the boardroom is you look around the table and say who here actually wrote a personal check to own stock in this company?
And I want to tell you every company whose board I’ve been on I was the only guy in the room that did that.
So tell me what they’re doing there. What they’re doing there is trying to make sure they’re going to stay there, because they get hundreds of thousands of dollars in stock options and stock gifts, so they want to make the CEO happy.
They were a CEO once and they wanted their board to make them happy so they try and give as good as they get.
You can watch the entire discussion here:
For all the latest news and podcasts, join our free newsletter here.
Don’t forget to check out our FREE Large Cap 1000 – Stock Screener, here at The Acquirer’s Multiple:
One Comment on “Nelson Peltz: The First Thing You Do As An Activist Investor Is…”
I do not disagree with what Peltz says about skin in the game on the part of board members. But, there are situations where skin in the game is not enough. I have been involved in mutliple takeover and activist type situations in which some of the board members had substantial direct invvestments in the company yet the company was maaterially underperforming because they did not have experience, skills nor track records to ensure that performance and value was maximized.