30 months — 30 months of an intense and incredibly fulfilling professional experience. When Vivendi entered Ubisoft’s capital on October 14, 2015, the prevailing sentiment in France was that we were doomed, that the adversary was too strong and too financially shrewd. What had happened at Havas, Vivendi and Telecom Italia was happening to us. Thankfully, sentiment outside of France was more supportive, but we still faced questions.

Fast-forward two and a half years, and here we are, stronger than ever, with amazing support from our employees, players and shareholders and an evolved shareholding structure that has met with overwhelming appreciation.

I wanted to put down some thoughts, while it’s all still fresh, on what we did right in terms of communication. Facing an activist investor is becoming increasingly common and I thought I would share some learnings that could prove valuable.

First and foremost, our success is the victory of a company — Ubisoft — and its management, led by Yves Guillemot. Whatever the defense and counter-defense tactics you’re going to put in place, you won’t achieve much without a visionary management, a great strategy and, even more importantly, strong execution[1] — we have been blessed to have all three. Ubisoft was built for the long term and has repeatedly demonstrated an exceptional ability to adapt to the fast changing videogame industry. Even more impressive, the massive shareholder value[2] created over the years has been achieved mostly organically. In the past two and a half years, we continued to deliver, with amazing performance from all teams. Our games are great, our marketing campaigns win awards around the globe, we are recognized for managing some of the best live services in the videogame industry and for being a great place to work. Our very strong share price performance over the past years reflects that.

With such a strong foundation, you are in a good place to start.

Next, the tactics:

First off, you must identify every one of your weaknesses, every broken windows. That’s what the activist investor is looking for. And you need to do so in a very honest and straightforward manner. Look at them head-on and don’t lose time, because your adversary will take advantage of any opportunities that they can. Once identified, solve them and if you can’t, get your messages ready. At Ubisoft, we conducted this review with the help of our advisers, and the good news was there were few weaknesses that the activist investor could go after.

Our strategy was already clear and approved by shareholders. We had been conducting two ‘investor days” per year (one in Los Angeles, one in Paris) way before the arrival of Vivendi, explaining where we wanted to go and making regular updates on our progression. There was a shared understanding that Ubisoft’s lower profitability versus the two industry leaders was not related to our cost structure (an activist investor’s favorite), but to the fact we were a catch-up story, notably on digital. The path towards closing the gap on digital and profitability had been presented to and validated by the investment community. We had full support from our shareholders. There were no broken windows.

On top of challenging a company’s strategy and cost structure, activist investors like to target governance practices. At Ubisoft, we have been engaging for years with our shareholders’ governance teams around each Annual General Meeting (AGM) in a very structured way, notably with the help of David Chase Lopes’ DFKing proxy solicitation team. Our board wasn’t yet fully independent when Vivendi came in? It did not pose a problem to our shareholders, as we had already committed to them to gradually add new independent Directors and reach full independence. There were no broken windows.

During creeping control or take-over situations, management standing can also be challenged if it does not have full support from its teams. Over its 32 years existence, through a clear understanding that this is a people centric industry, Ubisoft developed a great culture, with a strong commitment to nurture and support its talents. As a consequence, the energy and passion deployed by Ubisoft’s teams to protect its values and stand behind its management at the time of the first, critical, AGM (September 2016), impressed all attendees and observers. Combined with full support from our shareholders, this sent a loud and clear message to the activist investor. There were no broken windows.

In the end, we prevailed because we spent years preparing for this possibility. Even if you don’t feel the heat today, the more time you put in building relationship with shareholders early on (either through IR or governance engagements) and the more you focus on creating a strong company culture, the better your chances when somebody comes knocking at your door.

Second, know your adversary. Understand how they operate and make sure everybody (analysts, investors/shareholders, journalists, employees, partners and government) knows about it. Activist investors generally follow proven templates that they have repeated for years or even decades. In French we call it “cousu de fil blanc”, i.e. you can relatively easily predict the path they will follow, the tactics they will put in place and the communication tricks they will activate. It’s crucial to reveal those templates to everybody, so they can analyze what’s going on with informed eyes. Over the long term, this will significantly weaken the impact of the activist investor’s moves. In our case, Vivendi and its management had been taking control of companies for years mostly through creeping control, i.e. by taking control of Boards without paying shareholders a premium. We based all our tactics and communications on this understanding and we made sure everybody was aware of it (including what that meant in terms of their communication and messaging). It was instrumental in anticipating and minimizing the negative impact of their actions.

Third, play as a team. You are in it for the long haul and you won’t achieve anything without support from other departments. During this fight, Finance, Legal, Communication and Investor Relations — just to name a few — only had one agenda. Big (family) time. On the communication side, the level of integration between the wonderful Stephanie Magnier’s Communication team and the (also wonderful!) IR team has been great and highly effective. Obviously, presenting a unified front is key. But we have been innovative as well. For years, I have supported the idea that IR professionals should interact with journalists. Not as spokespeople, but as background information providers. As IR professionals, we must have a thorough understanding of our company’s strategy, a global view on how it fits with the various parts of the organization (Finance, R&D, Sales & Marketing, Human Resources, Legal, IT etc…) within the context of the industry and a global knowledge of our peers’ positioning, financial performance and Equity Story. With limited CEO and CFO disposable time, we are well placed to inform journalists and to provide a global context for any of their questions.

This brings us to my fourth point. When facing an activist investor, you have to constantly fight their communication tricks with facts and figures, with charts and analysts’ comments. It can be frustrating at times. As The Economist puts it, “the pursuit of “fairness” in reporting often creates phoney balance at the expense of truth. NASA scientist says Mars is probably uninhabited; Professor Snooks says it is teeming with aliens. It’s really a matter of opinion.”[3], but in the long run it paid off handsomely. At the end of the day, communication must not be a sport. It needs to remain a tool at the service of the company’s long term interest. Therefore, it is essential to avoid transforming the truth just for the sake of getting nice headlines. Those short, satisfying, management pleasing headlines, won’t bring your company anywhere in the long run. The defense against Vivendi was therefore a perfect opportunity to prove the effectiveness of the background meetings I mentioned earlier. In the end, they proved effective in deconstructing the other party’s storytelling, thanks to constant engagement with journalists based on data and articulated demonstrations. And it has been fun to do! In tandem, with the great Emmanuel Carré, Head of France PR, who had spent decades creating a qualitative long term relation with journalists, based on respect and transparency (remember the first point regarding the importance of getting ready).

Fifth, one of the cornerstone of our defense was to present a three-year plan at an investors event in London (February 2016) soon after the entry of Vivendi. Of course, the more credible the management is, the better the impact of such plan is and we were able to leverage the goodwill we had accumulated over the years. While our strategy was already well defined, the three-year plan provided visibility on what it meant in terms of value creation for our shareholders, as well as on Ubisoft’s potential moving forward. Furthermore, it allowed us to lead the debate while obliging the activist investor to position itself and risk looking out of touch with the videogame sector and the benefits of the ongoing digital revolution.

Sixth, build an A-team of advisers. On the Communication, IR and Proxy Fight sides, we were lucky to be accompanied by Jerome Biscay’s Brunswick team, Camille Putois and David Chase Lopes’ DFKing team. They all did an amazing job. Importantly, they were not only the best professional we could imagine working with, they also shared our values. They were ready to stand shoulder to shoulder with us, and believed in what we were fighting for. Big (family) time again.

Finally thoughts — I could go on for ages — you better have strong support from your friends and family, because it is going to be long, it is going to be tough, there will be plenty of difficult times. I would recommend lots of exercise as well (I beat my personal distance record with a 25 kms trail run two weeks before the first AGM in September 2016. It was hard!), even though Emmanuel Carré will tell you that sport is unhealthy.

These past 30 months, we clearly communicated what Ubisoft stands for. With its incredible corporate culture and values and its long-term approach, Ubisoft and its teams were ready to face the enemy. There is no better example of how far you can go when there is such an enormous, unified push towards achieving a common goal.

A huge thank you to my team for your outstanding support and a special thank you to Yves, Alain Martinez and Cécile Russeil — you are incredible fighters who never back down and true role models. I am blessed to be working with you. #AVERYFOREVER

Jean-Benoît Roquette, Ubisoft SVP IR

[1] “Strategy is a commodity, execution is an art” — Peter Drucker

[2] Ubisoft’s share price has grown 3 475% since its IPO in 1996 (as of March 27, 2018)

[3] « Art of the lie » The Economist Sept 10, 2016

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