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Nov 27, 2016

Advice for working with multiple brokers

How IROs can get the most from their relationships

This article was produced in association with ELITE Connect. It was originally published on the ELITE Connect platform.

The vast majority of listed companies rely on the services of one or two brokers to act as a vital communication channel between the business and its markets. As some companies look to explore the merits of multiple brokers, however, we take a look at how IROs can assess what tactics are best for them and maximize the impact of their approach.

Although now based in Canada, where adviser support is not mandated in the same way as the UK’s formal system of brokers, Karen Keyes, senior vice president of IR at Aimia, notes that similar criteria apply to choosing which banking teams to work with. ‘We typically assess who is doing transactional work for us already, what each bank’s strengths are and which one best understands the history of where we have come from,’ she says.  

And where can multiple brokers add the most value? From Keyes’ experience in the UK, using multiple brokers is a tactic that really comes into its own at the research and development stages of company messaging, but she advises that the true test of the relationship will often be during challenging times. 

‘Having multiple opinions at the table helps in the early stages when documents are still being drafted,’ Keyes notes. ‘At later stages, it’s important for the brokers and IR to present a consolidated view and IR has an important role to play in managing that. Brokers add value on the regular stuff, too, but you won’t know the strength of your brokers (or your relationship with them) until you have been through a management change, major acquisition/share issue or activist campaign with them.’  

FTSE 250 company Britvic is currently covered by a comprehensive list of 20 brokers. Steve Nightingale, director of IR, acknowledges that this is a considerable number, but says the advantages it brings to his small in-house IR team are significant, despite the management required.

‘Having a wide range of brokers covering us generates a broader consensus and range of estimates and views of the business,’ he points out. ‘It definitely opens up more avenues in terms of investors that are aware of our investor story. The only downside is time: 20 brokers means careful planning of pre and post-results days. Likewise, we try to work with as many different brokers as possible on corporate access and roadshows but someone always feels left out.’

So what can IROs do to maximize the positive impact of multi-broker working? Nightingale’s advice is to treat all brokers in the same way, irrespective of size. ‘For us, any prioritization [we do make] doesn’t correlate to the size of the brokers – it’s based on the level of time and attention they pay to us within their research, and the subsequent quality of this research,’ he says. ‘We have some smaller boutique brokers whose research we regularly see on the desks of investors across the UK and the US.’

IROs should also do all they can to build rapport with their brokers, and shouldn’t ignore the sell side, as Nightingale observes: ‘Make an effort outside of results season to meet your analysts; personal relationships are everything. Try not to have favorites and treat people fairly and equitably. At the same time, don’t make promises or commit to what you cannot deliver.

‘The sell side is still hugely important and will continue to have an important role going forward. Work hard at these relationships even when [brokers] have you on a sell recommendation ‒ some of our best coverage and investor access is from houses that have had us on a sell at some point.’

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