Trian Founder to Join Board of Unilever​

By Jake Rickman​

What do you need to know this week?

The founder of Trian Fund Management, Nelson Peltz, has been appointed to the board of Unilever as a non-executive director.

As we reported on not once, but twice: Trian acquired a 1.5% stake in the conglomerate company back in January following a sustained period of declining growth, culminating in its failed acquisition of pharma giant GlaxoSmithKline.

Trian is known for its activist investment strategy, which is where a minority shareholder entices a company’s management into adopting certain proposals through a mixture of persuasion and pressure.

Why is this important for your interviews?

A general tip to improve your commercial awareness is to choose an area of the market that interests you and stick with it. If we consider how frequently a situation can change, you will show interviewers a real grasp of the business world if you stay on top of the most recent news. It will also provide you with a deeper insight into the situation as you watch it unfold. Given our previous coverage of Unilever, it would be remiss not to consider how this most recent development might impact Unilever’s future (not to mention that Peltz’s daughter just married David Beckham’s son and football is in the business news this week as well!).

With a 1.5% stake in the company, Unilever was not exactly obligated to offer Peltz a seat on the board. But given that Peltz initiated activist campaigns against Unilever competitors Proctor & Gamble and Heinz and secured a board seat, management may have determined that working with Peltz was preferable to fending him and the fund off.

So what is Trian’s play? While all we can do is speculate, some analysts argue that Unilever has acquired too many different brands. As a consequence, its earnings potential is stunted. If this is the case, it might be advantageous to sell off portions of its portfolio, the cash proceeds of which can be used to either distribute to shareholders or acquire more fitting brands. Using his position as a shareholder and non-executive director Peltz may try and angle for this play.

But how? Traditionally, activist shareholders exert pressure on directors as shareholders. This is usually through appeals to the public and corralling other shareholders to back or oppose certain resolutions. With its founder on the board (albeit as a non-executive director), Trian will have more direct influence over the day-to-day decisions taken by the directors, especially given his track record with similar companies.

How is this topic relevant to law firms?

Unilever’s management will have to continue to ensure that it acts properly when dealing with shareholder pressure. Improperly following its constitutional procedure could open management up to public, if not legal, scrutiny.

Law firms with significant experience advising management of companies facing activist campaigns include Latham & Watkins and Kirkland & Ellis.