Investing: Activism Enters The Mainstream

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  • An activist investor has taken an 8.5% stake in Nielsen, and is urging the company to sell to private equity.

  • The firm, Elliot Management Corp., believes that Nielsen has moved too slowly in embracing a SaaS model for its retail tracking business, and has become too people-intensive.

  • Nielsen is exploring breaking its company up, while Elliot is pushing to sell the entire company together.

Elliott Management Corp. wants Nielsen to move faster, invest more in technology, and rely less on people.

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And it doesn't think the research firm can do all that as a standalone public company.

Thus, the activist investor has taken an 8.5% stake in Nielsen, reported the Wall Street Journal, and is very publicly urging Nielsen to explore a sale.

What's Elliott's gripe with Nielsen?

First off, it's worth noting Nielsen is comprised of two major businesses. There's the media research business, which among other things supplies the TV ratings information most people associate with Nielsen.

But Nielsen also has a huge market research business that collects information on how people shop in markets all over the world.

As much as TV networks like to beat Nielsen up on being slow to track digital TV consumption, Elliott sees that division as being solid, according to people familiar with the matter.

It's the market research business that Elliot sees as seriously flawed. For starters, it doesn't help that many of Nielsen's biggest customers in this sector, giant consumer goods marketers like Procter & Gamble, Unilever and others, are struggling with serious market disruption as people shift their shopping preferences to Amazon or direct to consumer brands.

But Elliott executives believe Nielsen has also moved way too slowly in embracing technology compared to its competitors, according to people familiar with the activist firm's thinking. Nielsen needs to morph into a more software-as-a-service, or SaaS model, rather than employing tons of people to provide its clients with long term, hands on service, the people said.

"They need to think more of a data as a service," said a person familiar with Elliott's thinking. "They don’t want 70 badged employees embedded at Kraft. That model is behind the times."

What does Elliot want to happen?

In July, Nielsen announced that is plan to explore a sale of its market research division, per Broadcasting and Cable.

But Elliott believes it would be better to sell the whole company, said people familiar with the matter. Nielsen has already had some inquiries from private equity firms, reported the Journal.

Elliott executives see this as the best outcome, since Nielsen needs to invest in technology and take a fair amount of time to transform it's business — a process that won't be easy as a public company answering to shareholders.

Several private equity firms could make sense as buyers. For example, former Nielsen CEO David Calhoun is a senior managing director at Blackstone Group, which also employs several other former Nielsen executives.

Executives at Elliott believe a sale could happen quickly, if Nielsen's leadership is willing to engage, according to the people.

For its part, Nielsen isn't ruling anything out. The firm provided the following statement:

"Nielsen’s Board of Directors and management team are actively focused on executing the company’s strategy to achieve sustainable, profitable growth and drive long-term value creation for all shareholders. On July 26, 2018, the Board announced that it is conducting an in-depth strategic review of Nielsen’s Buy segment in order to identify the most appropriate options for this segment going forward. The Board continues to evaluate opportunities to best position the business for long-term success and growth and to generate value for all shareholders.

"The Board and management regularly engage with shareholders and welcome the views and perspectives of its owners, including Elliott. Nielsen remains focused on its mission of providing clients with the most complete understanding of what consumers watch and buy with world-class measurement as well as analytics.

"Nielsen is, by nature, a data-centric company processing over 250 terabytes of data each day, measuring 20 million stores a year, covering over 100 markets around the globe."

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