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Book Excerpt: Charles Morgan on Jeff Ubben, Acxiom’s Battle With ValueAct

6 min read

Editor’s Note: Charles Morgan, the former chairman and CEO of Acxiom Corp. and founder of PrivacyStar, has written a book, “Matters of Life and Data: A Memoir.”

Subtitled “The Remarkable Journey of a Big Data Visionary Whose Work Impacted Millions (Including You),” the book goes inside Morgan’s life and work, including Acxiom’s battle with activist investor Jeff Ubben, which Arkansas Business covered extensively in the mid-2000s.

Morgan will talk about his book and his career as part of the Arkansas Venture Center’s BuildIT Fireside Chat event at 5:30 p.m. Tuesday at the Venture Center at 107 E. Markham St. in Little Rock. Arkansas Business Publisher Mitch Bettis will moderate the event.

Below is an excerpt of Morgan’s book about his dealings with Ubben and Ubben’s company, ValueAct Capital Partners. The fight between Morgan and Ubben came to a head in 2007 when the pair scuttled a $3 billion deal to sell Acxiom to ValueAct.

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Excerpt from “The Long Goodbye,” in “Matters of Life and Data,” by Charles Morgan:

One day in late 2004, when I happened to be in Little Rock, I got the phone call I’d been dreading. “We’re making a big commitment to your company,” Jeff Ubben said, “and I want to go on your board.” He launched into a pitch about how he could help us make money, how he understood financial structuring to increase shareholder value, how his analysts could help us do this and that. “Your stock should be worth a lot more,” he said. 

I attempted to put him off. “I’ll discuss it with our nominating committee,” I said. And I did. I told them I didn’t want this jerk on our board. I figured he had an agenda, maybe to sell us to Equifax or somebody like that. At the very least, I worried that he would be a disruptive presence, given his history. 

When I reported to Jeff that we felt it was a conflict of interest to have a representative of any institutional stockholder on our board, he let me know that he was very unhappy. 

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As I write this, I’ve been reading an article from the Summer 2007 Journal of Corporation Law called, “Corporate Governance and the New Hedge Fund Activism: An Empirical Analysis,” by Thomas W. Briggs, a corporate lawyer who represents hedge funds. It’s terrifying reading.

“‘Hungry’ hedge funds with outsized war chests and egos to match are said to be the ‘new raiders,’ or even the ‘new sheriffs of the boardroom,'” writes Briggs. “Hedge fund activists are not ‘normal’ institutional investors. They threaten and even actually launch proxy fights for corporate control. They attack in wolf packs.”

Briggs, who clearly knows the character of his clients, dates the emergence of such activism to the year 2005, so at least we can say we got in on the ground floor.

The proxy battle was Jeff’s next move. In April 2006, he made it clear to me that ValueAct Capital would put up its own slate of directors for election to the Acxiom board at our 2006 annual shareholders meeting. The ValueAct candidates were Ubben himself; Louis J. Andreozzi, a consultant to the hedge fund; and J. Michael Lawrie, a ValueAct partner.

Mud was slung — that’s the nicest thing I can say about what happened next. Ubben and his band of raiders first mounted a phone campaign to contact other shareholders, seeding their ranks with rumors about Acxiom, its board, and most especially me. Then they put up a website called “Change @ Acxiom.” This was full of the most ridiculous stuff you can imagine. They had tracked my airplane’s comings and goings, for example, and said something to the effect of, The plane arrives in Paris just in time for Fashion Week … of course Morgan’s beautiful young wife has to be there … 

I didn’t know what Fashion Week was, much less when it was. Unless I was on vacation, my trips to Paris were to visit our two businesses there. And Susie wasn’t even with me on the trip in question.

I was clearly the main target of the ValueAct website. 

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None of us at Acxiom had ever witnessed such orchestrated vitriol, much less been on the receiving end of it. They made me sound like an arrogant, selfish, feather-nesting felon. This was the “wolf pack” mentality at work. In fact, ValueAct’s public tarring became so outlandish that the SEC stepped in and made them take down some of the more egregious charges. 

In the article by Thomas Briggs about hedge fund tactics, there’s this quote from Martin Lipton, a prominent mergers and acquisitions lawyer: “The current high level of hedge fund activism warrants the same kind of preparation as for a hostile takeover bid.” That’s precisely how Acxiom viewed these attacks by Jeff Ubben and ValueAct. We hired a big-time, high-priced law firm, Wilson Sonsini Goodrich & Rosati, and for the next few months I was forced to spend hours and hours meeting with attorneys. 

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Then one day as we neared voting time, I got a phone call from Jeff Ubben. I think he realized he was going to lose the proxy battle. “Can I come see you?” he said. 

“What about, Jeff?” “I just need to talk. I need an hour — will you give me that?” He said he’d rather not meet at Acxiom, which I thought was the smartest decision he’d made so far. “I’ll be flying in on a private jet,” he said. “Maybe you could meet me at the airport and we could get a conference room where nobody would see us.” By now, he’d been in the press, I’d been in the press; for us to be seen together would raise eyebrows and possibly even affect Acxiom’s stock.

“Okay,” I said, “I’ll meet you at the Dillard’s private hangar.” 

More on Ubben, Shareholder Activism

(Editor’s Note: Below, Morgan shares with Arkansas Business some additional thoughts on the ValueAct episode.)

Guys like Ubben are scary; their horizons and objectives are typically so very different from the company’s leadership. Throughout my 36 years at Acxiom, I, alongside my leadership team, was looking at situations with an eye for the long-term; how to grow the business, how to develop technology ahead of the market, how to find the talent to get us there. We looked out a five or 10 or even a 15 year horizon for Acxiom while we knew ValueAct would never stay around more than three or four years. 

ValueAct and others are typically done with their “investment” in three or four years. They are not sensitive to if they’ve destroyed an otherwise bright future of a company. Oftentimes, they don’t care about the collateral damage after they’ve seized control. 

In my private conversations with Jeff, he had a lot of clever ideas about how we could use some creative “financial engineering” to create short-term shareholder value. I was not interested in just short-term value so basically, we just agreed to disagree. 

If the investors’ goals and objectives are not aligned with those of management, that’s a recipe for disaster. We never aligned with ValueAct on anything. Well, that’s not exactly right — we did agree that both of us would like to see the stock price higher, but I wanted to see it get higher steadily over the years, while Ubben wanted to see it spike higher now

The worst thing about these hedge fund activists is that they are powerful enough to totally disrupt the company’s business, customer relationships and the executive team. Everything that we did as an executive team for many months had Jeff Ubben and ValueAct in the background. We spent millions of dollars and thousands of hours trying to combat a multitude of false charges and disruptive actions taken by them. 

I believe their actions set Acxiom back years in terms of development, market position and valuation. Set them back, in fact, to shrink the business after it was all said and done.

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