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- The latest campaign for the Wall Street hedge fund Elliott Management is a big one, taking on the well-known American staple AT&T. The man in charge of pushing the massive company to make the changes the $38 billion fund sees fit is 39-year-old Jesse Cohn, the billionaire Paul Singer's right-hand man.
- Other than Singer himself, Cohn is the person most responsible for the transformation of Elliott from a distressed-situations specialist to the sprawling institutional behemoth it is today, with a separate private-equity arm and billions ready to be deployed for a new activist campaign.
- Cohn's tactics have included shrewdness and aggression in the 100-plus campaigns the Long Island, New York, native has run for Singer.
- Business Insider talked to more than two dozen of his colleagues, competitors, detractors, and friends, who said Elliott's rise mimicked Cohn's own personal rise in the firm and in corporate America.
- Sources told Business Insider that Cohn, and Elliott's activism as a whole, were transforming as the firm positions itself as a long-term investor.
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Jesse Cohn has been behind some of the ugliest shareholder tussles and boardroom battles in history during his 15 years at Paul Singer's Elliott Management.
His strategy of purchasing stock en masse and then demanding an overhaul of a company's business has provoked f-bombs from the Detroit businessman Peter Karmanos and paranoia from Athenahealth founder Jonathan Bush — the cousin of George W. Bush — that Cohn had him followed and photographed.
Now the 39-year-old — who is hooked on HBO's "Succession"— is setting his sights on his biggest target yet: the telecom giant AT&T.
Those who have worked on the other side of some of his 100-plus campaigns at Elliott say his track record should strike terror in the hearts of AT&T management, pointing to an uncanny ability to affect change at companies, including layoffs, cost cutting, and ousters of CEOs.
"I wouldn't want to be [AT&T management]," one longtime adviser to companies' boards of directors said.
In September, Cohn sent 23 pages to AT&T's board of directors, criticizing everything from the company's failed attempt to acquire T-Mobile in 2011 to its $67 billion acquisition of DirecTV — a move, he wrote, that produced "damaging results."
At the same time, Cohn proposed cuts, saying AT&T's organization was "unnecessarily complicated and inefficient, including a management layer that can be streamlined by reducing spans and layers and title proliferation."
Only a week later, AT&T's CEO Randall Stephenson publicly addressed Cohn's observations at a New York conference, acknowledging some of what Cohn outlined "makes a lot of sense." And, according to The Wall Street Journal, AT&T has begun exploring a split from DirecTV.
An institutional Elliott
The saga unfolding at AT&T is Cohn's latest work, set on a much grander stage than he has ever stood — a new peak for the $38 billion hedge fund's top lieutenant, because of the company's size and influence, that he's been building to.
A review of his career should be required reading for AT&T's board: From falling into finance as someone who didn't know what he wanted to do in his early 20s to becoming Paul Singer's attack dog on some of his most influential campaigns, Cohn has developed a reputation as a feared investor with the means to change America's blue-chip corporations.
Conversations with more than two dozen of his colleagues, competitors, detractors, and friends also reveal an evolution. Cohn has developed a more diplomatic touch, as his targets have become larger and overhauls need approval by long-term shareholders, such as BlackRock, State Street, and Vanguard.
People close to Cohn say he has gradually developed relationships with these large Wall Street investors, who hold key votes in any contest over how a large company is managed. He's on the boards of public companies, like Citrix and eBay, that he led campaigns on, as well as those of private companies that Elliott's private-equity arm has bought outright.
Chris Cernich, who once advised these large investors on how they should vote on some of Elliott's biggest proxy fights, including with the oil and gas company Hess, went so far as to say Cohn is perhaps the perfect exemplar of how Elliott has become the most institutional of activist investors.
Elliott "is one of the only activist funds that is not an alter ego of the founder," he said, as it maintains a corporate structure, with nine management-committee members around Singer. At the same time, its investments have increasingly been packaged as a play for the long-term good of a corporation.
This gives Cohn even more influence when he goes after a company like AT&T.
Cohn almost didn't join Elliott
Fifteen years ago, Cohn almost didn't join Elliott.
After spending two years on Morgan Stanley's mergers and acquisitions team, Cohn began to look for hedge funds to join, accepting an offer from Elliott, which was then focused only on distressed situations. Cohn then later received an offer from a more "established fund," according to Ray McGuire, his boss at Morgan who is now a vice chairman at Citigroup.
It came as no surprise that Cohn had options.
Originally a native of the Long Island hamlet Baldwin, New York, Cohn was a computer whiz kid in his youth, attending programming camps in the summer and earning a certification from the software programmer Novell for his coding abilities before he could drive. (Years later, he pushed Novell to sell itself for more than $2 billion to Attachmate, where Cohn joined the board.)
He went to the Wharton School of the University of Pennsylvania, where he was a part of a literary society, and graduated in 2002, when he started working for McGuire and the prolific Wall Street dealmaker Paul Taubman at Morgan Stanley. There he helped make connections in the software and technology space that he eventually made his mark on at Elliott, sources said.
At Morgan, McGuire said Cohn and fellow analyst Arta Tabaee, now a managing director at Clearlake Capital Group, were always around, constantly popping into his office with new ideas. McGuire described Cohn as fearless and "summa smart."
The idea of joining Elliott ultimately prevailed. After talking his decision over with McGuire, Cohn decided to stick with his gut.
"I think that was an early defining moment for Jesse, to honor his commitment," McGuire, who is still in touch with Cohn today, said.
In the subsequent years, the triathlon enthusiast would build Elliott's activism unit from scratch, with a focus and energy that is unnerving to opponents and endearing to colleagues. He finds it difficult sitting still at his desk and often needs to take a break to walk through Central Park, according to those who have worked with him, bringing colleagues with him to strategize about their next investment.
The birth of Elliott's activism
Cohn started Elliott's activism unit in 2005 with a small investment in the switch maker and Cisco competitor Enterasys Networks, which he pressured to sell, doubling Elliott's investment in the process.
The initial investment in Enterasys was only $15 million, but to Cohn, it was huge, according to people close to him. He took a shine to hunting down the inner details of a business, cold calling customers, employees, and engineers in the switch-making industry for insights. The company had loyal customers, but its products weren't reaching enough people, he concluded.
His career purpose began to take shape: He loved improving companies.
Soon, a whole swath of other small tech companies came in to Cohn's sights. He thought they had compelling products, but their stocks were underperforming. So he amassed stakes in their businesses, approached their management, and told them they were doing it wrong. Oftentimes, it wasn't pretty.
In 2006, Harry Knowles was the CEO of the bar-code systems maker Metrologic Instruments. After Metrologic underperformed that year, Knowles said Cohn approached him in an annual shareholder meeting and told him he would have to step aside and sell the company.
"He said, 'Hey, let me talk to you,'" Knowles said. "You don't have any choice."
Knowles, then in his 70s, thought he was getting old for the job. He cooperated with Cohn in selling Metrologic to the private-equity shop Francisco Partners and Elliott for $440 million. The newly installed owners hired another CEO to replace Knowles, who, in turn, fired Knowles' close friends and jettisoned business lines that relied on Knowles' personal involvement. The process was "painful," Knowles said.
It wouldn't be the last time Cohn's pressure on companies would contribute to the fraying of relationships among company management.
By 2012, Cohn set his sights on Compuware, a Detroit-based software company created by the former Carolina Hurricanes owner Pete Karmanos. Karmanos was on his way out of the company after ceding leadership and ready for a happy retirement. But after Elliott bought a stake and pressed for layoffs and cost cutting, he and his newly appointed CEO stopped getting along.
As Cohn bought more and more of the company's stock, multiple expletive-laced arguments broke out between Karmanos and his chosen successor, Bob Paul, over whether to cut costs, including his own retirement parties that would have cost $1.5 million and involved renting out the Detroit City Airport, according to a lawsuit later lodged by Karmanos against his fellow board members.
Karmanos' temperament soured more when Cohn ratcheted up the stakes and made a bid for the Compuware business as a whole at the end of 2012, phoning up Paul and telling him the bid would hit the press in 30 seconds, according to court documents.
After the board declined the bid, Karmanos told a crowd of several hundred people at a business conference that if he were still in charge, he "would tell the hedge fund to go f--- themselves," according to a lengthy account of the matter in the Detroit Free Press.
Testimony from board members in Karmanos' lawsuit detailed an aggressive approach by Cohn.
They said Cohn had thick files of personal information on each board member with details on which jobs their spouses had and schools their kids attended. He had the files laid out on a conference-room table when the board met with Cohn in Elliott's New York office. Karmanos has said he believed it played a part in intimidating his board into eventually selling.
'We're the aggressors'
Cohn's reputation as an attack dog intensified during his campaign against the healthcare-technology company Athenahealth.
A feature story in The New Yorker detailed his campaign last year against Athenahealth's former CEO Jonathan Bush, who said an anonymous Instagram user had taken pictures of him with a female friend and sent them to his wife. He wondered if Elliott was behind it — something the firm denies. Bush resigned from the company after a London-based reporter discovered details of domestic abuse in divorce filings from more than a decade ago.
Elliott has repeatedly denied the allegations in the lawsuit and past media reports on the firm's tactics, including any insinuation that it placed the story about Bush's history of domestic violence. But sources said the stories played to the firm's benefit. Boards and lawyers are reticent to fight a firm with Elliott's reputation. The stock price of companies Elliott takes a stake in often jump when a campaign is announced.
"Part of Elliott's story to their investors and to the media is 'we're the aggressors,'" said J.B. Heaton, a managing member of One Hat Research and a former lawyer that worked on activism cases who has studied activism's effectiveness.
Cohn's ability to create change within an organization has been rewarded by Singer.
A couple years ago, Cohn paid $30 million for a penthouse in Manhattan's financial district that spans 6,000 square feet, according to media reports at the time.
Private-equity powers
One weapon in Cohn's arsenal that would make him even more effective came in 2015: a private-equity fund Cohn created within Elliott, called Evergreen Coast Capital.
The very nature of private equity — buying a company whole and improving its performance over as many as five years — was a departure from Cohn's reputation for seeking immediate change.
The fund was started by Cohn after Elliott lost out on a bid for a company in which it was an investor: Riverbed Technologies, which Thoma Bravo and other investors bought in 2014. The fund has put billions of dollars to work, taking companies like Gigamon, Travelport, and Athenahealth private.
With a private-equity fund at Cohn's disposal, he could walk into a boardroom meeting as a shareholder to talk about a company's performance, and then swiftly pivot, turning the conversation into a dialogue about a possible sale of the company to Elliott, one person familiar with his campaigns said.
At least one instance where this happened was the sale of LifeLock Inc., a consumer-protection company, which, after an initial meeting with Cohn in 2016, was sold to another company where Elliott was a significant investor: Symantec Corp.
What AT&T can expect
At AT&T, of course, executives don't need to worry about a buyout. The company is too large to be acquired outright.
Instead, Cohn is seeking to extract concessions from the company's management to conduct its business differently, including halting plans for any merger and acquisition activity, outsourcing work, and closing "redundant stores."
The labor-union Communications Workers of America is fighting back against the proposals.
"Our position is that this business strategy will harm local communities that rely on the good jobs and advanced communications networks that flow from AT&T investment," Christopher Shelton, the union's president, wrote in a letter to the AT&T board.
Cohn has joined the boards of companies he has pressed in the past, such as Citrix and eBay. While it's unknown if he would end up on the AT&T board, Cohn's current and former board-member colleagues say he isn't resistant to compromise once he's able to get a better understanding of the company.
Fred Salerno, the chair of the cybersecurity company Akamai's board, said Cohn had originally wanted to fire the CEO and sell the company but relented after meeting with executives.
"He's proven himself to be a very collaborative board member," said Bob Calderoni, who leads Citrix's board, which Cohn has been on the board for four years.
Calderoni believes the time on boards has helped Cohn learn that "operating a company is different than investing in a company."
"He's willing to listen and learn," he said.
Lately, Cohn has been consuming a steady diet of literature, from Bob Iger's book "The Ride of a Lifetime," which offers a window into how Igor ran the Walt Disney Co. as CEO, to "Dreyer's English," a book about writing by a top editor at Random House. A person close to Cohn said the latter book influenced his wordsmithing of the AT&T letter.
But while Cohn may be academic and cerebral, he hasn't lost the assertive nature for which he's so well known, people close to him said.
Some are not so quick to believe Cohn has turned a new leaf at all. One person who has represented companies said that while Cohn is easier to negotiate with in producing quick settlements, he doesn't for a minute think anyone who gets in his way won't suffer his wrath.
"The idea that he's turned a new leaf and he's a nice, kinder Jesse?" the person asked, considering the notion before then quickly dismissing it.
"I don't know. Go read The New Yorker article."
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