IR Monitor – 6th July 2022

This week’s news

Meetings with non-domestic investors increase since start of pandemic

New research from IR Magazine has revealed that almost four in ten of companies, globally, have seen an increase in the number of meetings with investors from outside their region since the start of the pandemic. This increase has been most notable among American and European companies with 41 percent of American companies and 40 percent of European companies seeing an increase in investors from outside the home region. In Asia, however, fewer companies have seen this growth in non-domestic investor interest with 30 percent of Asian firms saying that interest has actually dropped since March 2020. These meetings haven’t necessarily translated into investments, however. Researchers also found that share registers have become slightly more global since the start of the pandemic but the increase in the number of shares held by investors from outside the region is less pronounced. Only 21 percent of American and 22 percent of European companies have seen an increase in non-domestic investors on the share register since the start of the pandemic.

Three keys to effective mergers-and-acquisitions communications 

Mergers and acquisitions represent a significant event for ownership, clients and employees. To maximize the return on your investment, Forbes suggests it’s critical to plan, message and execute your M&A communications strategically. Effective plans should include a consideration of audience, distribution channels, timing and clearly defined spokespeople. Messaging should also be clearly defined, cohesive, consistent and distributed through the appropriate channels based on audience. A strategic plan must consider external communications to clients and internal communications to staff carefully crafted to the right people in the right way at the right time.

Adjusting strategy in a tight market

As the business environment adjusts to more inflation and less abundant capital, companies need to stop prioritising growth above all else (while recognising that innovation remains essential). They will need better thought-through strategies that pay attention to costs as well as necessary changes to technologies and business models. Harvard Business Review suggests managers need to do three things. Firstly, they must accept change and compare the investment case for action with what inaction will entail (often declining margins and volumes). Next, they must understand the benefits of innovation and how it relates to both growth and margins. Finally, they must acknowledge that, rather than risk over-investing, they can also pursue the more modest strategy of being a good partner. Their criteria should be not the upside alone but also the risk and magnitude of investment to be undertaken. The time for proper strategy work, grounded in reality and connected to the long term vision of a firm, has arrived.

Investors at risk from the rise of private equity ‘pyramid’ deals

A new breed of private equity “continuation deals” have been criticised by Patrick Hosking in the The Times for their lack of transparency. The chief investment officer of Amundi, the French investment group, has even suggested that continuation funds look like “pyramid schemes” because of their circular nature whereby a PE house sells an asset from one fund to another new fund. In the States, the SEC wants to introduce more checks to ensure valuations are fair. In the past, day-to-day valuations did not matter for traditional private equity investors locked, as they were, into funds for ten years. Nowadays, they matter significantly more, as the presence of continuation deals grows increasingly common in the private equity world. For all the obligations, complications, pressures and dangers of being a listed company, Hosking concludes that there is one important way in which the listed company world trumps the unlisted world: in price discovery and valuation certainty.

The political polarisation of corporate America: a problem for shareholders

A recent paper published by the National Bureau of Economic Research has concluded that executive teams in American firms are becoming increasingly partisan. Teams are becoming more politically polarised as people seek out colleagues with like-minded views. These findings are supported by an examination of political affiliations from voter registration records for top executives at S&P 1500 firms between 2008 and 2020. The researchers assessed the impact of polarisation by looking at companies with both abnormally large losses and executive departures, finding that when politically misaligned executives left, their companies’ stock prices suffered more. At a time when companies are told constantly to speak out on various issues, the researchers suggest that the political polarisation of corporate America may not be in the financial interest of shareholders.

And finally… The worst PR but best IR?

Jonathan Miller’s latest opinion piece in The Spectator gives us an interesting thought for this week: Ryanair is the best airline. Reliable and inexpensive, Ryanair offers a better service than any of its short haul counterparts. This conclusion does not take into consideration the flying experience itself, the incomprehensible flight crews or the inedible food. But if one’s priorities are a low price and a high likelihood of the plane actually making it off the ground, Ryanair is best. Finally, while the Irish airline has “the worst public relations” it has also built a fabulously profitable business for investors.

Contact Us

To be added to the distribution list for the IR Monitor, or for further information on the dedicated investor relations team at FTI, please contact [email protected].