Activist Investing: The Epidemic Plaguing Boardrooms

When the activist fund Starboard launched an attack on Yahoo! (NASDAQ:YHOO), it was just one of the many recent takeover targets.

Noted activist investor Bill Ackman has launched attacks against Herbalife (NYSE:HLF) and embattled drug company Valeant (NYSE:VRX). Starboard previously launched attacks against Olive Garden's parent company (NYSE:DRI).

So what's the activist investor epidemic plaguing boardrooms? talked to Clarke Murphy, the CEO of Russell Reynolds Associates, one of the world's leading executive search firms, who shared his four tips for how companies can plan for activist investors.

Tip 1--Think Like an Activist Would

Thinking like an activist can help you prepare for a potential activist investor. Know which parts of a business an investor might target.

Tip 2--Evaluate Your Company

Understand your company and which areas are underperforming. Those sectors are prime targets for activist investors.

Tip 3--Make Your Board Effective

Make sure that shareholder value is maximized so an activist may never show up in the first place.

Tip 4--Have a Plan in Place

Have an action plan in place to prepare for a potential activist investor. Know who should be advising you and what steps to take so you can be ready to go.