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Sep 27, 2023

Deal or no deal: Top IROs talk M&A

Garnet Roach talks to leading IROs about acquiring and being acquired, winning over skeptical investors and working at the company that bought your firm

‘Every deal is different, but the principle from the investor relations perspective is the same,’ says Marina Calero, group head of investor relations at global event company Hyve. The firm was recently bought by Providence Private Equity in a £524 mn ($659 mn) deal approved by shareholders on May 3 – despite some of Hyve’s biggest shareowners stating they would vote against the sale.

This is the second time Calero has run IR for a firm that has been snapped up by private equity, joining Hyve from McCarthy & Stone, which was bought by Lone Star in early 2021, though in that instance she was there as an in-house consultant. During her time at Hyve, Calero has been involved in two acquisitions: 121 Group in fall 2021 and Fintech Meetup in spring 2022, each against a backdrop of ‘significant macro developments,’ she says.

Marina Calero
Marina Calero was at Hyve when it was acquired earlier this yeae

‘At the time of the 121 transaction, Hyve was still recovering from Covid-19 and we were watching a new strain spreading rapidly across the markets we operated in. And the second transaction was only a few weeks after the invasion of Ukraine. At the time, Hyve had a meaningful presence in both Russia and Ukraine and had to accelerate its plans to move toward advanced economies.’

The company also decided to fund its acquisition of 121 through an equity raise – something Calero says meant winning over a number of investors: ‘Because not only do you have an M&A deal, but there is also a dual equity raise running in parallel.’ So while the rationale behind the 121 deal was convincing, she says some new shareholders were initially unsure on the funding element: whether it should be done through debt or equity.

‘It was a big ask,’ recalls Calero. ‘Shareholders needed to understand – and believe – that a full recovery, not only from the pandemic but also from geopolitical factors, was coming and that the group would come out stronger and structurally fitter after a five-year transformation and a radical pivot toward advanced economies.’

To put the firm’s post-Covid transformation into perspective, Calero explains that five years ago, 95 percent of Hyve’s business was in emerging markets. Today, 95 percent of the business is in advanced economies. So how did Calero and Hyve win shareholders round?

It helps, she says, that Hyve has ‘historically been very acquisitive’, with a track record of rapidly integrating targets and making strong returns. This translates into trust in management and the support of long-term shareholders, which ultimately makes it easier to ask for more money if and when you need it.

Selling your deal

Brian Christie, vice president of IR at Canada’s Agnico Eagle Mines, also talks about the trust that comes from being an acquisitive firm. ‘If I look back on the 10 years I’ve been at Agnico, we’ve always been acquiring assets,’ he says.

Still, that doesn’t necessarily mean you never have to sell your shareholders on a deal. 

Brian Christie, Agnico Eagle Mines
Brian Christie, Agnico Eagle Mines

Recalling Agnico’s merger with Kirkland Lake, which completed in early 2022 and which Christie describes as ‘the biggest transaction in the gold business to date’, he says that while the two companies had a lot of shareholder crossover – and broad support for the merger – one of Kirkland’s biggest shareholders was against the deal from the start.

T Rowe Price saw good momentum in the Kirkland story, says Christie, but had virtually no holdings in Agnico. ‘It knew us but it thought our assets were older and maybe on the way down,’ he says. ‘At the first meeting, it announced, We don’t like this deal.’

Kirkland also had a large retail base – around 50 percent – though Christie says there had been little engagement on that front. Agnico, however, is very active on corporate access, typically holding 400-500 one-on-ones a year as well as retail ‘lunches’ with brokers – which it did for the Lakeland deal, ultimately getting around half of retail owners to cast their vote. 

What the firm's active approach means, says Christie, is that whenever a deal is on the cards, there is never any need to ‘ramp up’ engagement – because those meetings are already happening and those relationships are strong.

Targeting the top 50 holders in both companies, Christie explains how Agnico and Kirkland put together teams, including Sean Boyd, then chief executive of Agnico, and Anthony Makuch, Kirkland’s CEO. 

‘We divided up the top shareholders and deployed teams to meet with each of them,’ Christie says. ‘Then we did calls further down the investor base, went to the analysts and did retail engagement work.’ 

And it paid off, with investors on both sides rubber-stamping the merger – though he adds that, ultimately, T Rowe Price couldn’t be persuaded.

Two sides of the M&A coin

While Calero’s more recent M&A experience meant conversations around global pandemics and war in Europe – certainly not topics anyone expected to be on the cards just a few years ago – ‘it’s not typical that [macroeconomic factors] would be the focal point during M&A’, though they’re always a consideration, says Nina Goworek, vice president of strategic programs and operations and part of the IR team at Bristol Myers Squibb (BMS). ‘It’s much more about the value creation of the deal,’ she says.

Still, Goworek has certainly had her share of macro issues in M&A. She was part of the Roche team that acquired Genentech in 2009. ‘That was viewed as a hostile takeover,’ she says, explaining that Roche was a majority owner, looking to acquire the 44 percent of Genentech it didn’t already own. 

‘Investors understood why we were buying it. But then the financial markets collapsed, credit lines tightened and there were doubts we were going to be able to get funding.’

Nina Goworek, Bristol Myers Squibb
Nina Goworek, Bristol Myers Squibb

Describing it as a very interesting, unusual time, Goworek says Roche ‘had to go directly to bondholders to get verbal commitments prior to using banks for the bookrunning process. We also had to work with overlapping shareholders to see what price they would tender their shares so we could come to a negotiated share price with Genentech.’ In the end, the team pulled off a $40 bn deal at the height of the crisis.

From Roche, Goworek moved to lead the IR program at Celgene, which was acquired by BMS in 2019 despite being ‘considered a bit of a controversial deal’. Celgene investors thought the company was undervalued, explains Goworek, while some BMS investors felt the company was buying another ‘loss of exclusivity’. At BMS, she has been involved in two further acquisitions: MyoKardia in late 2020 and Turning Point Therapeutics in mid-2022.

So Goworek has been on the acquiring side and at the company that was acquired. Is there much difference when it comes to IR? ‘When you’re acquiring a company, you get involved much earlier in the process,’ she says. ‘When you’re on the side that’s being acquired, you tend to get brought in a bit later in the process, when the deal starts to feel real and you help finalize the messaging that will convey the benefits of the combined company to internal and external stakeholders.’

In Goworek’s experience, though, most of the onus of the work is on the firm doing the acquiring. ‘You have to justify the value you’re paying for, convey the benefits of the combined company and what you’re bringing to the table,’ she points out.

Patrick Kiss, head of IR and PR at German mall investor Deutsche EuroShop, had had plenty of experience acquiring assets – then last year his firm was itself bought in what he describes as a friendly deal by Oaktree and CURA for €2.4 bn ($2.6 bn). He says the role of IR remains the same throughout: serving as the intermediary between the capital markets and management, talking about the rationale of the deal, the effects on earnings and the financing behind the transaction. In takeovers, however, he describes ‘the legal corset [as usually being] very tight. IR can only answer and explain what has already been published in the official documents.’

Patrick Kiss, Deutsche EuroShop
Patrick Kiss, Deutsche EuroShop

Communicating success

And what about post-deal communications? If a deal is big enough, it will speak for itself. In the case of BMS’ acquisition of Celgene, Goworek says that despite the initial skepticism, three and a half years after the deal closed, people can see the value it brought. ‘We’ve been able to show that we’ve grown beyond the initial loss of exclusivity of one of our largest brands, as well as getting nine new medicines approved,’ she says.

This goes back to Calero’s point about having a track record of success – or creating that success where skepticism exists. If selling the deal is all about value creation and company strategy, so too are post-deal communications. ‘It is all about being consistent with what you said at the time of the acquisition and with what you said about how you’re going to grow your business more broadly in the future,’ says Calero.

M&A is also valuable for those involved, adds Kiss. ‘Transactions are super-exciting; you always learn something new and gain experience,’ he notes. ‘IR managers should try to be as involved as possible in the process. It is a labor-intensive time, but when it comes to a successful close, the joy compensates for everything.'

A Bain’s eye view

Talking about what’s on the horizon for M&A, Suzanne Kumar, vice president of the M&A practice at Bain & Company, says that while uncertainty remains a factor in a quieter market – she cites ‘recent news in the banking sector’, no doubt referring to Credit Suisse – M&A remains important. 

Suzanne Kumar, Bain
Suzanne Kumar, Bain

‘We still talk about M&A because it is central to business strategy,’ she says. ‘When we look at the value of doing M&A in an economic down cycle, we can see there’s a need for companies to pivot and stay on the offensive.’ She adds that during the great financial crisis, ‘those companies that stayed on the sidelines lost out compared with companies that continued to do at least one deal during that time period.’

For Kumar, companies should see a down market as an opportunity to differentiate themselves. Indeed, despite the steep climbdown from the all-time highs of 2021, she says M&A certainly hasn’t gone away. ‘A lot of deals are still happening, but the rate of dealmaking and the volume of deals that are being announced are at a lower level, though not inconsistent with what we saw pre-pandemic,’ she explains. ‘Overall, it’s a shift away from larger, higher-value deals and toward small to medium-sized deals at this point.’

It’s a trend she sees continuing over the near to mid-term, though she adds that there could also be ‘some bold moves from relatively cash-rich companies and those with strong balance sheets’.

Garnet Roach

Garnet Roach joined IR Magazine in October 2012, working on both the editorial and research sides of the publication. Prior to entering the world of investor relations, her freelance career covered a broad range of subjects, from technology to...

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