Handling activist campaigns is one of the biggest challenges IROs face. Whether you’ve dealt with them before or are getting ready for the possibility, knowing how to prepare can turn a potential conflict into a productive conversation.
On our Winning IR podcast, we spoke with Kiley Rawlins, VP Investor Relations at Ulta Beauty, about her experience navigating several activist situations. She shared her approach to preparing for, identifying, and managing activist campaigns. If you’re looking to strengthen your activism preparedness strategy, Kiley’s insights offer a practical roadmap.
Kiley emphasized that every activist campaign evolves differently. So, rather than relying on a template, it’s important to understand the key issues relevant to your business.
"I think you start with understanding what are the key issues and considerations for your particular business and your particular category."
She uses the example of working in consumer discretionary retail, where e-commerce spin-offs became a hot topic several years ago. In that environment, she and her team examined their business through an activist lens, asking themselves how they would respond if approached with such a proposal.
This approach requires IROs to stay attuned to broader market trends while also assessing their company's vulnerabilities. You need to understand what's happening across your sector, identify the hot-button issues that activists are focusing on, and then evaluate where your company might be exposed.
“First, what's happening in the broader market, what's happening in your category, and then where, are you vulnerable.”
It’s important for IROs to maintain ongoing connections. Not just with active shareholders, but also with passive investors. These conversations can even be integrated into regular proxy engagement activities.
One of Kiley's core principles is the importance of building relationships before you need them. As you engage with investors, she recommends soliciting their perspectives on sector-specific issues. This feedback becomes invaluable when assessing potential vulnerabilities and developing your defensive positioning.
Another pillar of activism readiness is regular communication with your board and management team. Kiley advises keeping leadership informed about developments in your category, even when they don't directly affect your company yet.
At Ulta Beauty, Kiley's team reports formally to the board twice a year, comparing the company across several peer groups using various metrics. This analysis covers share performance, valuation metrics, profitability, growth, and operational measures. Importantly, she examines multiple peer groups, including both operational peers and the company's ISS peer group.
"I think it's important to look at it from an operational lens, but also from an ISS standpoint."
This dual perspective is key. Activist campaigns often reference ISS peer groups, which may include companies you wouldn't typically compare yourself to. For Ulta Beauty, this means Under Armour appears in their ISS peer group, despite being an unlikely operational comparison.
Beyond formal reporting, Kiley maintains informal surveillance and shares unusual developments with the board as needed. Not all significant events align neatly with reporting calendars, so staying vigilant and communicating proactively keeps leadership prepared.
When it comes to specific preparedness measures, Kiley takes a practical approach. While you cannot template responses for unknown scenarios, you can establish your advisor team in advance. She recommends identifying and building relationships with your legal advisor, investment bank, proxy solicitor, and communications advisor before you need them.
"You have to understand and have in place who's on your advisor team. Who are you going to pull in if something happens? Have that before you need it."
Beyond assembling advisors, Kiley suggests scenario planning through tabletop exercises geared towards activist preparedness. While she admits to disliking these exercises, she acknowledges their value in helping boards and management teams think through problem-solving processes. These practice sessions establish frameworks for decision-making, determining who takes the initial call, how the company responds, and which board member serves as the activist's primary contact.
Giving advisors opportunities to engage with the board, whether through tabletop exercises or by providing updates on market trends and current campaigns allows advisors to understand your team dynamics, culture, and board composition, making them more effective when a real situation arises.
An important reminder about selecting advisors: choose people you are ready to be in the trenches with. Activist campaigns don't follow standard business hours, and the intensity of these situations requires working with advisors who understand your organization deeply and can operate effectively under pressure.
While IR naturally focuses on shareholders, Kiley emphasizes that activism affects multiple constituencies. Customers and employees can both be significantly impacted by activist campaigns, making it critical to coordinate with your PR team and employee communications team during scenario planning.
“Whatever you're sharing with the outside world with investors in response is going to impact other constituencies that you deal with. Making sure that you're all aligned and prepared for that is really important.“
Ensuring alignment across all communication channels prevents mixed messages and maintains organizational cohesion during challenging periods. What you’re communicating to investors will inevitably affect other stakeholders, too.
The employee communication component serves two purposes. It reassures employees by providing visibility into the situation, strategy, and developments. Secondly, it reminds them about protecting non-public and confidential information during a period when anything said, written, or sent becomes fair game.
Certain metrics warrant particularly close monitoring regardless of your sector. Stock performance ranks at the top of Kiley's list, but she emphasizes looking at extended timeframes rather than short-term fluctuations.
"Generally, my experience has been that an activist doesn't come in if you underperform your peers or index for 30 days or six months, right? It is after a prolonged period of underperformance that you need to start being concerned."
She recommends tracking stock valuation and shareholder returns over one-year, three-year, and five-year periods. Operational metrics also matter significantly, including profitability, profit growth, asset utilization, and return on invested capital, all benchmarked against peers over time.
Beyond financial metrics, Kiley highlights the importance of corporate governance factors. Board structure, classification, composition, tenure, and refreshment strategy all come under scrutiny during activist campaigns. Working with your general counsel to understand your governance practices, policies, and strategies prepares you for these discussions.
Management performace and credibility are also closely monitored by Kiley. Assessing your team's credibility relative to peers and sector competitors becomes important during hostile situations, making candid evaluation essential.
“I think you have to assess your team's credibility versus other peers and other folks in the sector because that will come into play in a hostile situation. And so understanding that and being candid with your team about that is important.”
When it comes to the initial signs of activist interest, Kiley maintains close partnerships with her CFO and general counsel. Whenever something feels unusual, she escalates it to these partners, prefacing the conversation by acknowledging it may be nothing. Her rule of thumb centers on a simple question: if something surfaces in 30 to 60 days and we didn't surface what we're seeing now, would we regret it?
“Whenever there's something that just feels weird, I elevate it to the CFO and my General counsel. I will preface it by saying ‘this could be nothing, but this is what I'm seeing’. And my rule of thumb is, if I don't say something and it escalates, will I wish I had done something in hindsight? Then I like working with the GC and CFO to determine when to pull in the CEO?”
This approach creates a small working group that can assess situations without sounding false alarms to the entire board and management team. When all three partners agree that something seems concerning, they can escalate appropriately.
Kiley monitors peer company activism much more closely than broader market trends, using tools like FactSet and AlphaSense to track SEC filings and news articles. She sets up alerts to catch 13D filings and other relevant developments within her peer group.
For the broader market, she relies more heavily on advisors who participate in multiple situations and can identify emerging trends and evolving tactics. Investment banks, communications advisors, and proxy solicitors provide valuable market intelligence based on their diverse experiences.
She acknowledges that monitoring the entire market would be overwhelming and impractical. However, she recommends tracking larger, more notable activist firms and their major campaigns, even when they don't involve direct peers, to maintain general awareness of activist strategies and tactics.
When asked about deciding whether to engage with activists, Kiley is unequivocal: not engaging creates more risk and can quickly turn situations hostile. She advises always engaging, as these initial interactions serve multiple purposes.
Early conversations help you understand the activist's interest, assess their tone, and determine whether they're approaching the situation constructively. In Kiley's experience, these situations often develop over time rather than appearing suddenly with a 13D filing. Initial contacts and early conversations provide opportunities to understand positions and perspectives before situations escalate.
"I think it's hard to know what the right strategy is until you have that first conversation with the activist. What is the tone? Are they friendly? Are they more constructive?"
To Kiley, the question isn't whether to engage, but how to engage, who should participate, and what communication strategy to employ. Initial interactions might focus on listening to understand ideas and positions, or they might be more collaborative. Ultimately, the board and CEO make strategic decisions with input from IR and advisors; however, those initial engagements significantly impact the campaign's tone.
Avoiding hostile situations benefits everyone involved. Hostile campaigns distract teams, employees, and customers, making it worthwhile to approach initial outreach with genuine intent to engage.
Throughout the engagement process, Kiley emphasizes the importance of soliciting shareholder feedback. While you might not explicitly mention ongoing activist conversations, understanding concerns and issues allows you to gauge your largest shareholders' viewpoints. This information shapes your engagement strategy and should be shared with your team and board.
Kiley's ultimate guidance for IROs centers on prevention and preparation. The best way to avoid activist situations is to deliver strong shareholder returns while maintaining transparency, credibility, and strong relationships with shareholders.
For IROs who haven't experienced activism firsthand, Kiley recommends working with advisors to understand the typical process. What happens first? What are the filing requirements? What steps should the company take upon receiving that initial call or email? Understanding that investor requests for CEO time require a different evaluation when they come from activist firms prepares you to respond appropriately.
She also emphasizes the importance of having a day-one plan with your team. Even if every situation unfolds differently, knowing your initial response framework provides confidence and direction when activism emerges.
"Ultimately, the best way to avoid an activist situation is to deliver strong shareholder returns. To maintain transparency and credibility and strong relationships with your shareholders."
Activism readiness isn't about having all the answers in advance. It's about building relationships, establishing processes, assembling the right team, understanding your vulnerabilities, and preparing your organization to respond thoughtfully rather than reactively. By following these principles, you can navigate activist situations more effectively, whether they ultimately prove collaborative or contentious.
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