IR Challenges in 2011: M&A Activities and Management Changes calls for effective communication channels

From a Swedish perspective, 2010 was a great year where many companies exceeded the markets expectations; the same goes for the Swedish economy, ranked as one of the strongest finances in the European Union. The results of restructuring processes finally paid off, strengthening balance sheets even if sales volumes still where halting.

As a result, listed companies during the previous year (just as I predicted in January 2010) ramped up their IR activities and launched ambitions growth strategies. As a consequence Nordic IROs, have been quite busy with Capital Markets Days and roadshows, producing new investor presentations and spending hundreds of hours communicating new strategies and financial targets to investors and analyst. In other words, a quite normal IR year, compared to the turmoil in 2008 and 2009.

Will the day-to-day work for IR professionals go on as usual in 2011? Well, the everyday life for IROs are never normal and I have identified some challenges that I think Nordic IR professionals will be facing in 2011.

1. M&A Activities – 24/7 availability and transparency

Strong balance sheets and growth strategies has set Nordic companies in a shopping mood. M&A activities ramped up already during the second half of 2010, starting with Hexagon’s acquisition of US-based Intergraph in July and continued during the autumn. December 20, Novozymes announced the acquisition of EMD/Merck Crop BioScience. One day later, Alfa Laval acquired Aalborg Industries. 60 analysts attended Alfa Laval’s conference call, held three days before Christmas Eve, which clearly signals the markets interest in M&A activities.

A merger or acquisition always generates several questions:

  • How is it going to be financed?
  • What are the costs for consolidating the two businesses?
  • How does the the activity match the company’s strategy?

To successfully explain your company’s actions, IROs must proactively prepare Q&As as soon as the first discussions have been initiated; which often is months or years before the final announcement.

When communicating their growth strategy the company also must explain why they think growth by acquisitions is needed and what kind of preferences they are looking for.

When announcing an acquisition it has to be followed by a conference call or webcast where senior management attend and can answer questions. IROs have to be prepared to be available 24/7 the coming weeks to continue answer questions.

Best practice is if the company shortly after the announcement can organise a Capital Markets Day or another Q&A session with CEO to further explain the acquisitions from a strategic perspective.

2. Do not underestimate the impact of Management Changes

Many Nordic companies are facing management turmoil in 2011 as several CEOs have resigned or changed company, for example Hans Stråberg at Electrolux, Olof Faxander are leaving SSAB to start at Sandvik, Leif Johansson at Volvo, and Stine Bosse at Tryg.

Companies have a tendency to underestimate the impact management changes (CFO, CEO etc) have on the market. The company is often in no hurry of recruiting a new CEO, while investors start to get quite nervous about whose running the business pretty quickly.

For the IRO, management changes increase their workload as they are losing key persons in their IR-team and need to educate a new CFO or CEO about the importance of investor relations.

The appointment of a new, internally recruited CEO or CFO is has advantages, as the person will know the company as well as the industry. The IR-team is facing greater challenges if the new management member is recruited externally and has no experience of either the company, or the business. As the market has little patient with new CEOs, this person has to learn the company’s strategy, business fundamentals, the industry and market growth drivers and how to communicate successfully with the financial market within a couple of months.

In the midst of the education process the IRO tries to get them to prioritise IR activities including quarterly presentations, road shows and one-to-one meetings.

To ease the transition process for the IR-team, I often recommend my clients to conduct a perception study and to use the analysis get the management’s attention on compulsory IR priorities during the year.

  • This allows the new CFO or CEO to get an introduction of weaknesses and strengths in the company’s strategy and key drivers in the industry.
  • Secondly, these key insights help the newcomer to be more prepared for what questions they most likely will receive during a one-to-one meeting, quarterly webcast or road show.

I have stressed the challenges of management changes in an earlier post: Pros and Cons with management changes.

3. Effective communication channels is a must

To successfully handle both M&A activities with 24/7 availability and transparency and coping with management changes, IROs are depended on effective communication channels. The IR-team should serve as a CRM-function for the investors and analysts, answering questions, explain strategies and building confidence and relations.

To be able to do this and act proactively the IR-function need to have effective communication channels. I have for example suggested that a blog post summarising Q&As from the latest quarterly presentation would save the IR-team hours. Or if a blog is to revolutionary, why not at least categorise questions from the webcast in chapters?

And to my liking, IR-professionals have recognised the growing importance of IR websites and are planning to update their on-line communication in 2011. When doing so, it is essential to assess the value social media can bring into a new on-line communications strategy. If you are searching for IR Website Best Practices, I strongly recommend that you download Q4 Web Systems free Whitepaper:

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About irinsights

Senior consultant at PR and Communications firm Springtime in Stockholm, Sweden. Focus on IR, social media & perception studies. Blog about trends and challenges for Scandinavian IR professionals, providing insights on how to use social media, corporate blogs and on-line communication to reach out to investors in a changing media landscape. Everything I post here is my personal opinion, and does not represent the views of my employer.
This entry was posted in Capital Markets Day, Communication Channels, Investor Relations, IR and Social Media, M&A Activities, Management Changes and tagged , , , , , , , , , , , , , , , . Bookmark the permalink.

2 Responses to IR Challenges in 2011: M&A Activities and Management Changes calls for effective communication channels

  1. Sheryl Joyce says:

    Annica, as usual you provide some excellent insight and advice. I absolutely agree that it is essential for a company to conduct a conference call and webcast of a strategic acquisition.

    In addition to the call I would also advise to post the presentation on Slideshare and subsequently embed it on the IR website. I would also take steps to go through the Q&A and also have a copy to download as well.

    It would also be beneficial to post a video of the CEO giving their insight (and more than just regurgitating the press release) of the how, why and what of the acquisition. Similar to posting the presentation on Slideshare, the video could be uploaded on YouTube and then also embedded on the IR website.

    With respect to management changes, companies need to do more than issue a press release. In my opinion, they should also be prepared to incorporate in the corporate governance section (which should contain the executive (and board) bios to underscore why the replacement is the best person to fill the role and how they will contribute to the overall strategic direction for the good of the business.

    Thank you for mentioning our latest whitepaper!

    Best,
    Sheryl

    • admin says:

      Sheryl,

      Glad that you liked the post and many thanks for sharing more useful advices. I agree that both Slideshare and Youtube have the potential of being very useful and effective communication channels for IR.

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