What is Flip-in?
In the context of corporate governance and boards, a "flip-in" or "flip in" refers to a situation where an investor or group of investors take control of a majority of the shares of a public company and then replace the existing management team with a new team. This new team is brought in with the goal of turning around the company's performance and increasing its value.
This strategy can be used by the investors when they believe that the public market is undervaluing a company and that by taking control of the company, they can better manage it and increase its value. It can be done through a merger or acquisition, where the investor acquires a public company and takes control of its assets to manage and ultimately resell the company for a profit.
Flip-in can be a high-risk, high-reward strategy, as it allows for new management to take control of an underperforming or undervalued company, but it also comes with the added complexity and responsibilities of managing a public company and its assets. Additionally, it also carries the risk of misalignment of incentives between the investors, shareholders and the company's management.
The board of directors and the governance of the company plays a crucial role in the flip-in process, they should carefully evaluate the potential benefits and drawbacks of such strategy, to align it with the long-term goals of the company and its shareholders, and to ensure that the investors and the new management act in the best interest of the company and its stakeholders.