M&A attracts new types of investors

Jul 24, 2012
<p>NIRI panel discusses how shareholders change during a deal</p>

You spend years cultivating your relationships with the buy side and then, just when those ties would most come in handy, you find yourself with a whole new set of investors to get to know.

That’s the scenario facing IR departments involved in a deal situation, cautioned panelists at an M&A workshop during NIRI’s 2012 annual conference in Seattle.

‘You’ll hear from shareholders you’ve never heard from before – and never will hear from again until the next company you join is acquired,’ said Andrew Kramer, senior director of IR at Interactive Data.

Kramer has experienced deals as both the acquirer and the target, and said these new shareholders are only interested in one thing: will the deal go through?

As a result, IR must have a clear understanding of the timeline and any regulatory or shareholder approvals that need to be cleared. ‘You need to know and own those milestones in the process,’ he said.

The communication demands from these new shareholders can be intense. Brian McPeak discussed his time as vice president of communications at Rohm and Haas during its $15 bn acquisition by Dow Chemical three years ago.

After financing problems threatened the outcome, Rohm and Haas took the unusual step of suing Dow to force the deal’s completion.

At this point, McPeak’s phone started ringing off the hook. ‘The new investors – the ones that have come in to buy at whatever the margins are between the price they bought and the close price – they’re calling you two, three, four times a day trying to figure out when this deal is going to close and when they’re going to get their money,’ he recalled.

It’s not just short-term investors who pile on pressure during a deal, however. Jim Buckley, partner at IR and communications consultancy Sharon Merrill, explained an interesting fact about Fidelity’s research tactics.

He said the investor had been known –especially in M&A situations – to ask companies the same question on different occasions, perhaps a couple of weeks apart, and then compare the answers it receives word for word.

‘If it sees some sort of shift in the wording – something as simple as you used to say ‘very’ and now you don’t – that can sometimes signal things,’ Buckley said.

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