Noemi Distefano explores how corporate access has changed, how it can improve and what investor preferences look like in 2023
Corporate access has changed profoundly in recent years. The change has been driven mostly by new regulation, such as Mifid II, and the irreversible shifts brought about by the Covid-19 pandemic.
Today, geopolitical tensions and global macroeconomic volatility also play a significant role in how companies and investors think and operate. In this new landscape, firms often face challenges in getting in front of the right investors and using their management time effectively. So how can they overcome this?
Industry leaders tell us their expectations for corporate access in 2023, from meeting channels to meeting formats, and offer advice to IROs and the broader investment community on what can be done to improve investors’ corporate access experience in 2023.
Elizabeth Librizzi, senior vice president and head of corporate access at asset management companyAllianceBernstein (AB), explains how corporate access has changed over the last decade or so, starting from when it was one of the ‘newer offerings’ the sell side was able to bring to the table.
‘Over the last six to 10 years, corporate access has been evolving,’ she says. ‘We have seen several buy-side firms try to bring capabilities in-house to better control not only their corporate narrative but also their engagement with the corporate community. As a result, it’s enabled corporates to have more robust communication with the buy-side community and unlock relationships they didn’t have before as there are many buy-side firms that don’t engage broadly and deeply with the sell side.’
David Whyte, CEO and co-founder of Irwin, says that when it comes to corporate access, issuers’ satisfaction and involvement with the sell side has declined in recent years. This, he says, ‘has been driven partly by [regulation such as] Mifid II and by the inherent conflict of interest in having the sell side involved in corporate access.’
Explaining where the conflict of interest lies, Whyte says the sell side is more motivated to put issuers in front of its best clients on the buy side. ‘Those buy-side clients tend to be the ones that trade the most,' he says. ‘But the ones that trade the most aren't [always] the best shareholders for issuers – so there’s that conflict of interest.’
He adds that this approach is not new, but says it’s become more pervasive over the last few years as the margins on the sell side suffered a decline, forcing sell-side firms to direct more business toward their highest-paying clients. But what caused that decline in the first place?
‘Mifid II, various innovations in technology and increasing competition are all factors that have accelerated the trend where issuers are taking more of the onus to own the relationship between the investor and the issuer and where they can now be more proactive themselves – though this does vary company to company and broker to broker,’ Whyte notes.
Finite resourceIndustry insiders and investors alike agree corporate access is about securing meaningful interaction with existing and potential investors, but stress it’s important not to overdo it. ‘Corporate access is a finite resource,’ says Librizzi. ‘There are only so many hours in a day and only a certain amount of time corporate leaders can commit to talking to the buy side. They have a day job and a company to run. As investors, we respect that and want them to run their companies.’
Librizzi says the pandemic has somewhat exacerbated the ‘onslaught’ of corporate access. ‘It’s a good thing but the flip side is that there have been a lot of events,’ she notes. ‘I think it’s been in the sell side’s interest to try to remain engaged during a time when that was hard.’
Mary Turnbull, managing director for corporate access at Florida-based Raymond James & Associates, says investor relations teams play a significant role in balancing busy executive schedules and investor engagement. ‘Generally, investor relations professionals are trying to maximize the time available for corporate access events and the interactions between the company and the investors,’ she says.
Corporate access, like other things in business, is about skills. But what skills matter most to investors? Turnbull’s advice is: ‘Be creative, flexible and nimble. Those are the three things both people in my seat and IR professionals need to bear in mind.’
For Librizzi, organization is paramount on both sides. ‘When we plan an engagement internally, we identify a host, set an agenda and communicate it to the corporate so it is well equipped to know what AB wants to talk about heading into this engagement,’ she explains. ‘This enables the corporates to get the right people on their side as well as to understand who on our side is participating.’
Whyte advises: ‘Be prepared, be engaged, be transparent and be respectful.’ On the subject of preparedness, he points out that it’s important for companies to collect data and information on the investors they are about to engage with. ‘Because they want to understand how you run your business, you need to try to understand how they run theirs,’ he explains.
When it comes to engagement, Whyte urges companies to tailor their messaging to specific audiences. ‘No two investors are the same and therefore they shouldn’t be treated as such,’ he says. ‘It’s important to understand what they are looking for in a company and to tailor the messaging based on that.’
Lack of transparencyIn the current market upheaval, caused by geopolitical tensions and the global recession, investors and portfolio managers have often lamented – privately or on the record – companies’ lack of transparency around effective strategies in a time of turmoil.
Rightly, they want to know what a firm plans to do if a complex challenge arises. For investors, it’s less about crystal gazing than identifying weaknesses, forecasting challenges and being ready to act if and when needed.
‘It’s important to show investors that you have a solution for a potential problem that might be caused by macro environment shifts,’ says Whyte. He reaffirms the importance of respect. ‘Being respectful should be something that goes without saying but, in my experience, it doesn’t,’ he adds. ‘I’ve been in various meetings that get very heated, especially if it's with current shareholders that have lost money.
‘In this instance, it’s super-important to just do everything you can to be respectful. Understand that it’s okay for others to have a different opinion or point of view and do not lose your cool, because when that happens it’s a relationship killer.’
In tense situations during corporate access meetings, Whyte says humor can go a long way, as can small gestures such as follow-ups and thank-you notes.
Make in person a priority again For more than two years, people muddled through events by tapping elbows on their home desks instead of shaking hands. Corporate access events were canceled, postponed or converted to fully virtual interactions.
And while it’s certainly true that some changes brought about by the pandemic are here to stay, investors are nevertheless ready to get back to in-person interaction – and some value physical meetings far more than hybrid or virtual events.
Edward Young, head of corporate access and research at Norges Bank Investment Management, says the level of insight up for grabs at an in-person event is ‘unrivalled’.
‘What we value most highly in terms of corporate access is differentiated in-person access,’ he explains. ‘That could be headquarters or site visits where we can see differentiated levels of management and where that company operates first-hand.’
Young explains that for his company there are times when an in-person interaction is preferred.
‘Those times would be our first time meeting a management team, because it will help us to build that relationship,’ he says. ‘Also important are roadshows or the launch of a new strategy, business plan or deal.’
Librizzi agrees that in some instances, in person is the way to go. ‘In-person events should be a priority around companies’ big announcements,’ she says. ’If there is a particular event happening in your company, I think you’re going to want to get in front of your key shareholders in person.’
In terms of meeting formats, investment conferences, one-to-one meetings, industry-specific conferences and non-deal roadshows seem to be top of mind for investors in 2023.
‘For AB, the one-on-one meeting with the C-suite is very important,’ observes Librizzi. ‘That allows us to ask some detailed and pointed questions that may be specific to our investment thesis, for example.
‘Conferences have a higher weight in the investment community’s minds because they enable one to gauge sentiment. The corporate headquarters meeting is also key – and that’s something that has been lacking since the start of the pandemic.’
Young says that, overall, his company has been attending fewer conferences than in the past. ‘Driving that is a deterioration in the quality of meetings at those events,’ he explains. ‘So we’re being more selective in our attendance. The real value is the content and networking opportunities they provide. We are happy to have companies visiting us in our offices as part of a non-deal roadshow.’
Get creative for successIndustry experts also urge companies to think outside the box when it comes to corporate access. Whyte says it’s important to test creative formats for engaging with investors.
‘I know of companies that are using podcasts as a channel for investors to learn more about them,’ he says. ‘Storytelling through channels like this, trialing video to help create some visual stories and evolving the investor deck are all really important things.’
In addition, Whyte says there is an opportunity now for companies to boost their investor reach by testing the effectiveness of their marketing in tertiary regions.
‘Those are smaller and less popular money centers,’ he explains. ‘And there is a view that it’s only worth going to the main money centers around the world and acquiring the main blue-chip investors – but this is the wrong attitude. Frankly, that's an even harder route. Following the crowd is only ever going to get you average or below-average results.’
