PLAYERS BLAZING A TENDER TRAIL

CARL ICAHN JUST DECIDED TO ADD another notch to his belt. He’s found a real estate partnership ripe for a tender offer. He pages through the computer database in his New York office and finds a number, picks up his phone and dials- the 214 area code. If your company is lcahn’s unfortunate prey, you’d better hope that you get to Sherri Herman before he does.

Although lcahn and Herman are a time zone apart, they are each powerful combatants in an arena that tew even understand. Icahn is best known for his high-flying 1980s hostile takeovers. However, in more than one tender offer, when he didn’t engage Herman’s services before his opposition did, he didn’t get all that he had been seeking.

Herman’s job is to find elegant solutions for one basic problem common to all publicly held corporations: dealing with shareholders. Whenever a corporation needs to make a move of just about any kind-either offensive or defensive-the shareholders have to be informed and polled, the votes tallied, results reported. It’s not glamorous: nor is it a business for the organizationally faint of heart. It’s the kind of arcane, behind-the-scenes, detail-oriented drudgery that falls under the aegis of the corporate secretary, CFO or securities attorney.

Corporations judge proxy management firms like The Herman Group on the speed and accuracy with which they find shareholders and get their votes. The deal in question can range from an annual meeting, tender or exchange offer, reorganization and restructuring, an odd-lot buyback or an initial public offering, to undertaking or defending against a hostile takeover.

And in this most complicated business, The Herman Group finds its niche in highly difficult transactions, such as rights offerings, in which shareholders may be either hard to rind or hostile to the deal being offered. In these sensitive situations, the kind of work The Herman Group does-and how quickly, completely and discreetly it can be done-is crucial in making sure the deal happens at all.

The fact that The Herman Group is on Sun Jacinto Street rather than Wall Street could be enough reason for many companies not to hire her. What keeps them coming, according to one former client, is that she’s an acknowledged leader in her field.

She’s worked with Dallas’ Hallwood Real Estate and Sunshine Mining Company, but the majority of her work-for clients such as New York’s Lexington Corporate Properties, Boston’s Liberty Real Estate Corporation, and Chicago’s Walton Street Capital Acquisition Company-has earned her more a national than a local reputation.

One well-known client is Michael Ashner, for whose New York-based Apollo Real Estate Advisors Herman has handled a number of deals, many of them real estate partnership tender offers. Ashner says of Sherri Herman, “She gets about a 60 to 70 percent share of the business in limited partnership tender offers. I don’t know that anyone does as much as she does.

“She has to be very good if a New York-based company will come all the way to Dallas to use her,” he says. “The measure of her competence is that we would actually undergo the inconvenience to use a Dallas firm.”

SHERRI HERMAN, 39, GREW UP IN DeSoto. She did not aspire to own a proxy management firm, but to be an accountant. When she talks about that career goal now, she says with a smile, “that wasn’t a good personality fit for me.”

She attended North Texas State University and by the early 1980s was running the investor relations department for Dallas-based Saxon Oil.

Herman’s passion for what she does comes through with a definite touch of the dramatic. It’s easier to picture this petite brunette as an actress rather than as a woman who can look at a page of numbers and know exactly what they are and how to deal with them.

And although her business is numbers and paper, her life has certainly taken some dramatic turns.

She was, in fact, “discovered” much like leading ladies used to be discovered at Schwab’s in Hollywood. Her Schwab’s moment came in 1985 as she helped execute an oil and gas partnership deal for Saxon. Once the deal was done, Ted Buchanan of Dean Witter and Bill Gazzetti of Saxon (now president and CEO of Dallas-based Hallwood Realty) encouraged her to become a consultant, to help companies execute other similar deals.

As an independent project-management consultant from 1985 to 1990, Herman traveled to the cities where her clients’ deals were, setting up an office and hiring staff to handle each one. Once her son, Taylor, was born, she took him and his nanny along with her. By the time daughter Whitney was bom in 1987, Sherri Herman felt she knew how to handle almost any situation.

“I was in Midland (doing a deal) when 1 went into labor, and I didn’t want to have the baby there,” she recalls. “So 1 got a doctor to give me something to stop the labor, and I got on a Southwest flight to Dallas without telling them I was in labor until the plane was in the air.”

Once the plane landed at Love Field, Herman proceeded to Medical City Dallas Hospital and gave birth. Shortly thereafter, she began an easier task: giving birth to The Herman Group.

Now. Sherri Herman’s corner office affords an excellent view of that monument to money, the new Federal Reserve Bank of Dallas, which is just across the Woodall Rodgers freeway from The Herman Group’s office space on !he 21st floor of San Jacinto Tower.

The information Herman manages means money to her clients, and that in turn has brought money back to her. In 199 ], the fledgling company had a gross revenue of $400,000. By 1996, gross revenue was S10 million, and, Herman says, she’s averaging three to four times growth per year. This kind of exponential expansion brought the company from 6,000 square feet of space to 40,000 square feet in 1996 alone. She expects her need for office space to double in two years.

Herman runs the company of about 200 employees with the help of five senior executives, including her top deputies, Margaret Bell, executive vice president, and Palmer Pratt, senior vice president. Of the top five, four are women; of the 10 most seniorexec-utives, only two are men.

“It just happened that way,” Herman says. “This is detail-oriented work, and I’ve hired a lot of women because [women] are multi-task-oriented detail people, the kind I need.”

On the from lines of the multi-task detail are The Herman Group’s 130 or so “information agents”-many of them former lawyers, bankers and teachers-who spend their shifts calling shareholders. They’re not brokers; they can’t give opinions or advice. All they can do is describe whatever the shareholders are being asked to vote on and give shareholders facts so they can determine how to vote.

The progress of the information agents is tracked with proprietary software Sherri Herman developed with help from a team of software engineers. The software allows the Herman Group to update its clients periodically regarding how many shareholders have been contacted, what the shareholder sentiment is, and other such issues that could be crucial to a developing deal.

All of this is accomplished under the watchful, though not always present, eye of the Securities and Exchange Commission, which has very rigid rules regarding shareholder contact. If they ’ re not careful, firms in this business can get caught in a bind trying to please clients, especially when using new technology and trying to follow the SEC’s regulations.

Herman claims to not have a high turnoverorburnout factor among her information agents, even though they spend their entire shifts on the phone and confined to cubic les Dilbert would recognize immediately. Often dinner is brought in for those working late; a workout room is available; and in the summer Herman offers child care, hiring several of her son’s teachers to take employees1 children on field trips. Her own children are often at the office.

Right now. The Herman Group’s business comes primarily from her niche focus on partnerships. She feels the “big firms” in her business “missed the partnership industry vote by focusing on corporate work.”

Her competition for the most part are banks and those big Wall Street firms that have been around 100 years, firms like B.F. Morrow & Co., CIC. and Georgeson & Co. Herman’s biggest obstacle: long-standing relationships her potential clients have with these old-line firms. However, she says, “eventually they’ll screw up. and we’ll be there.”

She also sees her business growing in terms of globalization and technology. On her agenda: the potential of working with international stock exchanges. Herman also is president of the Small Business Capital Access Association. The Internet’s emergence as a business arena dovetails nicely with Herman’s longtime interest in developing new ways for small business owners to gain capital through means other than venture-capital firms.

“People who can’t get in front of venture-capital firms can get on the Internet,” she says, “and find investors there.” She is helping to blaze the paper trail here, too; the ever-watchful SEC wants to make sure all trades, even electronic ones, leave a trail of transaction to follow, and Herman is already laying the groundwork for more proprietary software that will serve this purpose.

After spending years as one of the few women in an industry that’s an undisputed men’s club, Herman says she does feel responsible for helping “to bring women along. Women entrepreneurs need to be taken seriously,” she says. Yet she herself reports little actual discrimination. Most men, it seems, would rather use the best company available than balk because that company is run by a woman.

So she’s not complaining. “I pinch myself sometimes. I always knew I was going to be something; fate and experience brought me to this place.”

Fate and experience-and a passion for organizing numbers and paper.

ANATOMY OF A PROXY FIGHT



SHAREHOLDER REVOLT: It’s A NIGHTMARE THAT CAM BREA. up a company, We asked The Herman Group to outlin in the least technical terms possible what happens when a company is forced by a shareholder group to call for special meeting to conduct a vote on an issue opposed by man agement; for example, removal of the board, a forced spin-of or stopping a merger.

1. Company files proxy statements and other documents with the SEC that name the dissident shareholders and share positions, with updates if the dissident group increases.

2. Company hires a proxy management firm (PMF). Throughout the project. PMF and client meet often to fine-tune strategies, format documents, develop timetables and allocate resources.

3. PMF works with company’s attorneys to obtain registered shareholder list, positions of brokerage firms and banks (known as ’’Streets”) holding shares for the benefit of their client shareholders. These individual shareholders are called “Street Name Beneficial Owners.” PMF also obtains list of these shareholders who have already agreed to be identified, known as “Non-Objecting Beneficial Owners (NOBOs).

4. PMF searches Streets to determine exact number of accounts behind shares attributed to brokerage firms or banks.

5. PMF mails proxy materials to registered shareholders and to brokers, banks or their agents who distribute them to the underlying beneficial owners.

6. PMF, working as information agent, obtains telephone numbers of shareholders either mechanically or manually.



8. PMF places calls to shareholders and responds to incoming calls from shareholders.



9. PMF identifies institutional shareholders and discusses with the company issues regarding these shareholders.



10. PMF tabulates incoming registered shareholders’ proxies.



11. Brokerage firms tabulate Street proxies and forward vote to PMF beginning 10 days before special shareholder meeting.



12. PMF aggressively follows up on unvoted Street positions and large shareholders.



13. PMF works with attorneys to set up procedures for presentation of proxies at meeting and preparation of other meeting documents.



14. The day before meeting, PMF arranges proxy cards, Street proxies and other documents for audit, ease of inspection.



15. PMF attends special meeting with client company and responds to questions regarding proxies and voting eligibility.



16. Vote is held; company’s propositions pass.



17. PMF presents company with a comprehensive projects binder containing all related materials.



18. The shareholder vote comes in-PMF and client celebrate

their success.