Extending IR activity to new regions
This article was produced in association with ELITE Connect. It was originally published on the ELITE Connect platform.
When companies want to expand their investor base, they often extend their IR program into new regions and markets. Overseas locations offer the chance to meet a whole new community of investors and tap long-term pools of capital. But issues such as market volatility, budget pressure and fear of the unknown can lead to IR anxiety. Below, two industry insiders share their tips for heading into new regions.
Do your research: Research is the single most important use of an IRO’s time when a company is looking to expand into a new region, says Loren Dufton, head of IR client services at Capita Asset Services. ‘Obviously it’s vital to ascertain that there’s likely to be interest in your company, but it’s also crucial to research the strength of this interest. There’s little point in travelling to the other side of the world before realizing that five of the 10 meetings you have scheduled are unlikely to be worthwhile,’ she explains.
Use management time selectively: Senior management’s time is precious, particularly that of CEOs/CFOs, says Henk-Jan ten Brinke, vice president of investor relations at Royal Ahold. ‘To avoid wasted time, especially for meetings that also involve a considerable amount of traveling time, I would carry out the first round of meetings myself, and then take the CEO/CFO to the most interesting or interested investors at a follow-up appointment,’ he notes.
Consider region specifics: It’s imperative to thoroughly investigate whether there are any cultural, political or religious issues that need to be taken into consideration in your desired region, advises Dufton. ‘Making sure you do your homework, especially in countries where political upheaval or cultural differences are likely to affect your investor strategy, will help avoid any embarrassment or offense and help ensure your efforts are worthwhile,’ she says.
Identifying the correct broker: ‘While it can be tempting to use brokers you’re already familiar and satisfied with, this might not always be the most sensible move when exploring new areas,’ says Dufton. ‘Find out which is the most important broker for your new region, especially in terms of how well established its personal network is for both the area and your industry sector.’
Communicate effectively with brokers: ‘It’s crucial to communicate clearly with your chosen broker exactly what your criteria are in terms of the kind of investors you are looking for,’ adds Brinke. ‘Outlining your expectations is essential from the outset as some brokers can be rather commission-driven; the potential for this to take precedent is much more likely without a clear brief from an IRO.’
Respect your existing shareholders: ‘While making the move into a new region can be exciting, companies need to be sure they are making the move for the right reasons,’ notes Dufton. ‘One consideration is the views of current shareholders: will they be happy with either new or further cross-border investment? Engaging with your existing shareholder base in advance of any major new regional work is important to maintain happy investors.’