07.10.2016

Activist investor takes a pop at Terex

Activist investor Richard McGuire of Mercato Capital, which owns a 5.1 percent stake in Terex, said yesterday that he thinks Terex has room to slash costs and sell assets.

In an interview with CNBC yesterday he is reported to have suggested that the company “sell businesses that are not at scale to allow attractive returns on capital."

He was not specific about with parts of Terex he had in mind for his cost cutting or disposal plans, or what he plans to do to try and make it happen. He acquired the stake in company in late July.

Vertikal Comment

The problem with activist investors is that they are almost always out to make a quick return for themselves or their funds, even if their short term moves to boost the share price causes longer term problems or challenges for the company concerned. Most of these investors/fund managers have little or no experience in running a company that makes things or provides a tangible business service.

That’s fine when they are investing, listening, analysing, and making decisions for their funds, in other words managing their own businesses and focusing on what they do best. But when they start trying to manage the business they invest in by proxy, even though they have zero knowledge or experience of managing such a company, it can get messy.

In this case Terex has a relatively new and well qualified chief executive, who appears to know exactly what he is doing to build a strong corporation around the three main divisions that will remain by the end of the year. As well as how to handle any operations that are no longer ‘core’.

Hopefully he will simply listen politely to what McGuire has to say, take on board anything that might be useful, and then carry on with the strategies that he and his team have formulated,or are working on, with the aim on delivering long term consistent returns for his shareholders, in what is a tough and cyclical market.