CASE STUDY: MUTUAL FUND PROXY | MARCH 2024

How EQ Fund Solutions' Activist Advisory & Analytics Services Helped to Secure Votes for Five CEF Reorganization Transactions

working together

Highlights

Selling company wanted to sell off five closed-end funds in which there was a presence of investors who were well-known for their activism efforts.
EQ worked with the selling company’s management team to conduct multiple shareholder identification and vote projection analysis reports, to ensure the transaction would be not jeopardized by activists' actions.
EQ made sure the solicitation was well-supported by retail shareholders and the transaction was completed in a timely manner.

Situation

As one fund company was looking to divest their closed-end funds to another company, it was discovered that there was significant ownership of shares held with a known activist as well as follower investors that could potentially jeopardize the transaction.

To reduce the potential harm to the transaction, the activist and follower investors’ ability to increase their holdings post-announcement of the deal and pre-record date needed to be minimized, as any additional increase in their holdings would put achieving the required votes in jeopardy.

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Solution

EQ worked closely with the selling company’s management and a plan was put in place where the time from the transaction announcement and the preliminary SEC filings to the record date was minimized. At the same time, EQ’s Ownership Intelligence team conducted multiple shareholder identification reports leading up to the record date in order to track any trading activity by the activist and follower investors. Based on the shareholder ID reports, EQ then put together multiple vote projection models that considered what votes would look like with and without activist investor support.

Post record and mailing date, to ensure a timely passage of proposals, EQ’s call center and mailing facility had to solicit sufficient votes from retail investors within a tight timeframe, so that it did not delay or harm the transaction. This process eventually became the model for the client’s solicitation strategy.

Two main reasons how the vote was achieved in a timely manner: first, EQ along with the client eliminated the time to move one of the closed-end funds to the acquiring company with a N14 merger or reorganization of the selling fund, into a pre-existing fund of the acquiring company. Second, the other four closed-end funds were moved over to the acquiring company’s fund platform via a 14A filing. EQ then showcased the ability to mobilize the call center and mail facility to quickly solicit votes from tens of thousands of shareholders.

diagram for selling multiple closed end funds

Results

Through EQ’s in-depth analysis, shareholder identification, vote projection capabilities and flawless execution of the solution plans, all five funds were successfully transferred to the acquiring company’s platform without unnecessary delays.

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