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Earlier this week, we explained the investment style and strategy of Nelson Peltz, based on a review of his 17 activist projects in the past 10 years (below).
A reader writes:
In your blog post, you pose the question as to why Peltz would want to go on the board of DuPont. While I think your comments regarding this are correct, I would suggest that there is more to it and that this would be applicable to any board role that he [or anyone - MRL] seeks. Peltz, like the best private equity guys, deeply understands the value creation process unlike the vast majority of individuals who serve on corporate boards. In that sense, he can bring, as do the other more successful activists, a level of both general value creation skill/focus and as importantly, discipline, to the board that is undoubtedly absent from not only the boards of companies that he targets but also, in my view, from the majority of public company boards.
I have restructured a number of underperforming company boards. One criteria I always seek is an individual who comes from the private equity (or even mezzanine lender) world in order to ensure that this general value creation mindset and skill is present in at least one other director besides myself. For the same reason, I believe Peltz seeks a board seat at target companies even when he may not have the experience with chemicals that he has with food. That said, the degree of analysis and research that Trian does on target companies does equip Peltz, Garden and any other nominee they may have with an in-depth and value creation oriented grasp of the company that is lacking in the incumbent board members (until they read a Trian white paper).
Emphasis ours. Worth remembering.
MRL |
As one of the protagonists in the Dupont story, Nelson Peltz has attracted abundant praise and criticism. More than one observer called the situation a watershed in activist investing. Another used it as an opportunity to slam his investment record, which a third then analyzed further.
Despite the extensive scrutiny, we don't have insight into how he thinks about investing. Like his peer Carl Icahn, we couldn't find any assessment of his investment approach. Earlier we dove into Icahn's portfolio and activist strategy. We'll leave the analysis of Peltz's investment performance to others. Here we dive into his investment process, and see what other investors can learn.
Like Icahn, Peltz has a distinct approach, with a highly concentrated portfolio, industry emphasis, thorough research, and operational and structural perspective. For all the publicity about the proxy contest at Dupont, it's only his third as a portfolio manager. Like Icahn, he settles with companies, for the BoD positions he values for his partners and himself. These allow him to pursue the operational and structural plan for a company.
We explain that approach in a current blog post.
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