Starboard Value is what is known as an activist investor. This means that the business seeks to persuade target businesses to change their ways in order to improve returns for shareholders. Typically, this means that the activist investor will petition for changes in a company at the board level downwards. Recently, Starburst Value has been targeting Yahoo, where it sees the business underperforming. In particular, it has sought to remove the current Chief Executive Officer, Marissa Mayer, in order to help drive changes. Yesterday, Yahoo announced it has reached a settlement with Starboard, which sees both sides of the argument reach a compromise.
Starboard is gaining influence at Yahoo: it is gaining four seats on the board, including its Chief Executive Officer, Jeffrey Smith. Jeffrey is also gaining a seat on Yahoo's stragetic review committee, which is important as it is this team running the sale of Yahoo's core business. In exchange for these four seats, Starboard is dropping the plan to replace the entire Yahoo board and will not proceed with a proxy fight. A proxy fight is a way of the activist investor attempting to wrestle control of a business, or at least dislodge existing directors and increase their influence, through persuading other investors to allow them to gain influence. Although proxy fights are often unsuccessful for the activist investor, they do raise the profile of the underperformance of a given business as well as distract senior management from their day job of actually running the company – or in the case of Yahoo, from finding a buyer for the core business.
Going forward, Starboard's increased influence in Yahoo should prove very interesting. It ought to help Yahoo organise the core asset sale: Jeffrey Smith's influence on the strategic committee ought to accelerate the process. Industry experts believe Yahoo should share more financial information with potential buyers and that the sale could be announced this quarter, but will probably take longer to close. Another point to note is that whilst Starboard do not have the majority of board seats, they are likely to have support from Yahoo's independent directors and this will make it easier for Starboard to help steer the ailing technology company.
Ultimately, it would appear that Marissa Mayer's future running Yahoo are numbered. There is a chance that a buyer of Yahoo's core business would keep the existing senior management team, but this is considered unlikely. Verizon Wireless, one of the favourite businesses to buy Yahoo, are unlikely to keep Marissa as Chief Executive. Eric Jackson, from SpringOwl Asset Management, said this on Marissa: "The clock is ticking. I think the sale is a forgone conclusion now, so it's unlikely that Mayer will stay on with whoever buys the core business."