Recent market volatility has prompted the postponement of a number of IPOs (Initial Public Offerings). According to the Wall Street Journal more SEC-listed IPOs were delayed or pulled in August 2011 than in any month since April 2001. Communication with investors during this phase is critical. In this edition of Fidelio’s Overture, we explore the role of IR in IPOs and how a new breed of IRO (Investor Relations Officer) is emerging.
Gillian Karran-Cumberlege
The Uncertainty of IPOs – A key characteristic of many IPOs is uncertainty – usually a question of when and sometimes of whether. As such IR in an IPO has long been a conundrum. Particularly in a dual track situation (IPO or trade sale), does the company invest in a professional IR capability whose services may be short-lived or indeed never required?
The market is accustomed to interim management roles, including in the C suite. Recently we have identified a new promising trend – the rise of interim opportunities for Senior IR Directors.
IR de-risks the IPO – There is significant feedback from banks, advisors and most importantly investors that IPOs are more likely to succeed with a competent in-house IR capability. More importantly effective IR contributes to a healthy valuation longer term and, along with enhanced corporate reputation, can also support value in a trade sale.
We advise our clients to consider putting in place an IR capability ca. 6 months before the IPO takes place. This has the advantage of presenting a consistent and professional message to the market thereby helping to establish trust and to inform the equity story.
– Bob Lilja, founding partner of Lilja & Co, a market leader in German IPO advisory
Investors like commitment. This is easier to demonstrate if the only question is when (the IPO is coming to market) as opposed to whether. Here the company is often willing to take a longer term view to mapping, structuring and building the IR function well in advance of the transaction.
Building High Performance IR – Typically some elements of the IR function can be addressed by internal resources from finance or communication; it is the capital markets experience that is often sourced externally.
Consensus holds that a heavyweight IR professional will be unwilling to sign up to all but the most prestigious and watertight IPO (and some of the biggest IPOs have proved a rocky ride for IR practitioners). A novice or lightweight IRO arguably adds little value in the process.
The Advent of Interim IR – Times are changing for the IR profession. IR has come of age. It’s an attractive career choice and many practitioners want to continue in the role. The pyramid that is the FTSE 100 or the DAX 30, for example, offers a finite number of challenging positions. An IPO can offer genuine challenge. Longer term the company and the IRO may have different goals. A well structured interim position can satisfy both the candidate and the corporate.
From the corporate perspective, the interim role can attract an experienced IR Director who may or may not be attracted to a longer term commitment but will be a significant asset during the transaction. Moreover the experienced IR professional will be able to establish the IR function and ensure a seamless transition to the permanent candidate.
New Applications for Interim IR – Indeed we would argue that the interim IR model has a broader application. A senior interim IR Director can contribute significantly to a major change management programme. Or conduct a strategic review. Or establish a US or Asian IR capability. Or navigate the succession planning that often comes with a change of CEO or CFO.
Cross-border IR Market – In a number of regional markets attracting senior IR professionals has been constrained by the availability of sufficiently experienced candidates. Applying a cross-border approach to senior interim IR positions significantly deepens the talent pool. The dislocation of 2008/9 in highly developed markets contributes to flexibility, opening opportunities for candidates and corporates alike.
Interim IR opportunities can prove highly attractive to an IR Director like myself, who has wide-ranging in-house experience and is therefore able to hit the ground running. There is a tremendous satisfaction in being able to rise to challenges, often at short notice, and to deliver a high quality IR service to the Board and to shareholders. And all this is excellent positioning for future senior roles.
– Jill Sherratt, experienced IR Professional
New Horizons for Senior IROs – And what, you may ask, is in it for the senior IR Director with an accomplished linear career under his or her belt? Interim IR can and often does lead to a permanent role when both parties find the arrangement satisfactory. But there is another broader trend in the workplace. Senior level interim IR Directors may well have ticked the in-house career IR box. Their knowledge of regulation and the market, as well as their track record as trusted advisor, ultimately creates a strong platform for non-executive work. Thus interim IR can also be a precursor to going plural and enhanced Board diversity.
Coming Up…
Overture explores how talent drives valuation. Future editions of Overture will deal with
• Board Diversity and the Trusted Advisor
• Adding Value to Comp & Bens – Finance or HR?
• The Career Trajectory of the Senior IRO
• Quoted and Unquoted IR – a Convergence
• The Multilingual Sellside
Please contact us with comments or for more information on Fidelio Partners on info@fideliopartners.com