In today’s market environment, savvy companies are broadening their reach to focus on international investors for a well-balanced and diversified shareholder base.
But there is a strong caveat in going about this correctly. As Barbara Cano, managing partner at MBS Value Partners in New York, says: ‘While recognizing the need is an important first step, many companies don’t know how to identify the right targets, so they’re spinning their wheels reaching out to the wrong kind of investor.
‘They are also faced with the challenge of allocating time and resources to maintaining a close relationship with their current shareholders while also focusing on brand-new investors that need to be introduced to the company and the story.’
Cano notes that at MBS, one of the first goals working with a new client is to take a close look at the company’s shareholders to determine how this can be expanded and diversified – by geography and investment style – in line with the company’s specific investment proposition.
Best practice working
So how do you reach niche investors overseas? ‘Begin by ensuring your materials are up to best practice standards,’ advises Cano. ‘This means you have a clear and concise message that resonates throughout your materials. The corporate presentation, fact sheet and IR website all need to be aligned to quickly grab the analyst’s or investor’s attention, answering the question: why should I look at this stock?’
In this way, something as basic as having a company’s IR website up to best practice standards is vital. ‘A company’s IR website is often a new investor’s or analyst’s first stop to take an initial look at a firm,’ says Cano. ‘If it’s poorly written, difficult to navigate or incoherent it’s likely that investor will look no further.’
Sandra Novakov, a director at Citigate Dewe Rogerson’s IR practice in London, agrees. ‘In our experience, successful targeting of foreign investors requires a proactive approach, access to the right tools or external resources, a high-quality corporate website and information materials, and an IR team that is willing to canvass the world for appropriate targets for executive management meetings,’ she says.
‘At the same time, there is evidence of investors becoming increasingly proactive with 60 percent of companies in our research stating they have noticed an increase in direct requests for meetings from potential investors. To attract such approaches, companies are making sure their website and information materials do some of the hard work for them. Preliminary data from our research shows that 41 percent of companies are planning to upgrade their website or IR materials in 2017.’
Technology has also played a key role in maintaining dialogue with and marketing to foreign investors based further away from the company in question or from key financial centers regularly covered by non-deal roadshows. ‘We have witnessed a rise in the use of virtual events and roadshows, as well as increased use of video content on corporate websites,’ highlights Novakov.
According to preliminary findings from Citigate Dewe Rogerson’s 2017 IR survey, 32 percent of IROs proactively approach potential investors to set up meetings.So who to target?
‘Suitable targets are most frequently based on a fund manager’s sector holdings, investment style and assets under management,’ Novakov says. ‘This analysis is increasingly undertaken using third-party investor databases, which 39 percent of companies in our research claim to have access to. In addition, around 15 percent of companies now use corporate access platforms to reach potential investors and set up meetings.’
Message and culture
Within all this is the importance of tailoring your message – a tall order given that it requires attention to detail and a commitment to regularly revisiting and tailoring your corporate presentation before every new conference or non-deal roadshow. And cultural nuances and an information gap can pose challenges.
‘While English language generally works at investor meetings just about everywhere in the world, it’s often helpful to consider the audience in a given country and to think of local analogies to help investors understand how your product or service truly differentiates itself where it’s sold,’ observes Cano. ‘Don’t think about the product; think about the principles. Understand your audience’s culture and how the meeting participant approaches the world.’
You should also remember important, but often subtle, details, she adds: ‘Consider non-US investors when scheduling results calls to ensure the timing is hospitable to everyone based in multiple time zones. And pay attention to local holidays and potential conflicts. As with everything, it’s important to use a creative approach with a focus on the details.’
Novakov notes that initial meetings are often conducted by the IR team to maximize effectiveness of subsequent meetings with executive management and evaluate investors’ knowledge and appetite for investing in the stock. ‘According to our research, 92 percent of IR teams try to see potential investors whenever practicable ahead of any executive management meetings,’ she says.
Then there is what might be termed ‘expanding your horizons’. The traditional IRO approach for reaching international investors is attending conferences in key global money centers outside of your home nation. For Cano, that means heading to Europe. ‘A conference like the Bank of America Merrill Lynch Global Consumer & Retail Conference in London – one of the largest consumer and retail conferences in Europe – offers access to a critical mass of investors that makes it worth the trip for US companies,’ she says.
‘Along these lines, make sure you’re looking beyond industry conferences to also consider a growth or value conference overseas that’s aimed at companies of your size and offers a track record of good and varied attendance from investors beyond just your industry.’
Cano also recommends broadening your outreach to the sell side. ‘Introductory meetings with sell-side analysts are no guarantee they’ll initiate coverage, but if one likes your story it can result in invitations to new conferences, and/or a mention in that analyst’s regular note to clients, which will expose you to a new group of overseas investors.’
If the analyst offers to sponsor a non-deal roadshow, this also potentially opens the door to a new audience of investors you have never met before. ‘Each investment bank may also have different institutional relationships, so build relationships with a wide range of investment banks known for their strength in the overseas markets,’ says Cano. ‘Bulge-bracket, growth-oriented, boutique, high-net-worth and industry-specific investment banks have different types of clients all over the world that could potentially own your shares.’
In other words, mix up the destinations. ‘When you go on non-deal roadshows, make sure you are varying money centers on your calendar,’ Cano concludes. ‘There are investors all over the world, so make sure you are including new non-traditional international destinations when it makes sense.’
