Fresh off news that an activist investor acquired a 7% stake in Infoblox, we are getting questions from Gartner clients about the ramifications of this. Coincidentally, my colleague, Gary Spivak just published on the topic a few weeks back (and also guest-blogged on the topic back in 2015):
I&O Leaders Must Actively Respond When Key Vendors Face Activist Investor Pressures, http://www.gartner.com/document/3266633
It is a tricky subject, and it isn’t unilaterally good or bad. While every specific company situation is different, Gary notes in the research that ”Investor activism has impacted a number of notable public technology vendors in the past several years including BMC, Compuware, Riverbed, Juniper Networks, Citrix and EMC. Overall, the investors have been successful in generating positive returns on these efforts — for themselves. However, the activist investors frequently push for major changes, such as selling off divisions, selling the vendor, a narrowed focus on growing or profitable product lines and cutting expenses including head count. These changes often cause significant internal distractions that could impact product development, product support and morale within the vendor. I&O leaders must respond actively themselves.”
Why is this the case? Simply put, the goals of the activist don’t always align with customers of the technology. As Gary describes: Investor activism frequently has ramifications across corporate strategy and internal morale, which result in turnover of key staff and an unclear roadmap for clients.
So what should you do (or not do)? In the research, Gary makes four specific recommendations, and here is a snippet of one of them:
Avoid lock-in or long-term commitment to vendors under the influence of an activist investor. I&O leaders must avoid long-term commitments to the vendor. While the future may be rosy and the vendor may emerge more focused and stronger, this outcome is not a foregone conclusion.
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