The rise of interim IR
Working practices are rapidly shifting around the world. Offices are empty, homes are workplaces and many of us are reconsidering our role in working life. It is perhaps unsurprising that, both in the US and further afield, labor markets are undergoing a Great Resignation event.
Department of Labor figures show a record 4.3 mn Americans quit their jobs in August. Whether a sign of worker power in a job market plagued by shortages or a rebalancing of the economy due to the Covid-19 pandemic, there is a marked shift.
IR teams will find themselves no less affected by this shift, whether directly or indirectly. For Matt Chesler, partner at consulting firm FNK IR, it is one of the reasons why his company has built out its interim IR offering.
In between the worlds of full-time, in-house IR professionals and short-term, agency-led roles, interim IR is a blend of the two that offers candidates and companies a flexible, shorter-contract approach to managing capital markets communications.
It owes much to the familiar interim chief executive or CFO positions that organizations seek out to bridge gaps between permanent appointments or to oversee particular capital markets moves. It is designed to be a three to six-month engagement but can last as long as 18 months or as briefly as a single month, depending on its use.
Chesler explains that one of these uses comes at times when a company finds itself without an IRO due to ‘natural attrition’ or at a time of high job mobility, much as we are experiencing today.
With a two-week notice period the standard in the US, and parental leave becoming more generous and more commonplace, he says FNK’s interim IR practice can help smooth any transitions while maintaining regular contact with the market.
‘There may be other capable people within the organization, but it’s distracting for them to command the shop,’ he adds. Of course, with nobody steering the IR effort permanently, there is a need for ‘someone to come in, pick up the baton on an interim basis and then be a part of the process of locating the right long-term solution.’
Bridging the gap This is how Clara Melia, founder of UK IR consultancy Equitory, sees it employed most often. Her firm places a team of three – a director, a manager and an associate – each with their own expertise to cover the role fully.
One recent example, she says, was a FTSE 250 company that ‘wanted to take its time to find a replacement’ for an outgoing head of IR. Another saw her team take over for a firm undergoing a management change while juggling an activist on the share register.
Interim IR is a relatively recent addition to FNK’s offering, inspired in part by Chesler’s work at professional services firm PwC in what he calls ‘workouts and turnarounds’, where partners and other service providers would be brought in to help companies through complicated transactions or difficult times before ‘turning the reins over to ongoing management’.
This can be easily transcribed into the investor relations world when it comes to an IPO or similar capital markets transaction, when ‘more intensive’ communication strategies may be required, Chesler notes.
‘You won’t be surprised to hear me expressing the view that the sooner you can bring a competent IR professional into the IPO-readiness process, the better off the company will be,’ he says.
Having someone work alongside attorneys, accountants, capital markets advisers and other participants at an early stage can ensure ‘investor positioning is baked in early on’ in the process, Chesler explains: ‘It’s an elegant way to elevate its priority, while still allowing the company flexibility to select a long-term IRO when it suits.'
Anna Hartropp, an IR recruitment specialist based in London, says companies will also search for interim IR team members who have very specific expertise to help in more specialized ways.
‘Perhaps if there’s structural change or strategic change at a company and somebody just wants a very experienced pair of eyes on it, the firm might hire a senior interim IR person to help with a certain phase or a capital markets day or certain parts of delivering that strategy to shareholders,’ she explains. ‘Firms are buying in short-term strategic help.’
For pre-IPO companies, this may mean bringing in someone with banking or listing experience to set up the IR function. ‘The difference is these hires know it’s interim from the start,’ Hartropp adds. ‘So although they’re establishing parts of a function that hasn’t been in place before, for a newly listed company, they’re also having to do a lot so that they can leave sufficient reins for the new permanent person to pick up and put his or her own stamp on it. You definitely have to have a different approach.’
Hartropp herself had a stint as an interim IRO for UK IT services company Logica, which ceased to exist in 2013 after it was acquired by the Canada-based CGI Group. She describes Logica’s then-IR director Karen Keyes, who hired Hartropp to help bolster the firm’s annual reporting, as ‘very forward-thinking’.
‘It was brilliant because I did it on a six-month basis in between jobs while I was interviewing for other things, and it worked for both sides,’ says Hartropp. ‘You’re thinking very short term about what you have to deliver and – quite frankly – about the point of disclosure.’
Passing the baton Chesler agrees that this is one of the challenges of an interim role. ‘You need to build bridges faster than you otherwise would, because you only have a finite period of time,’ he explains. ‘You also need to be perceived as a team member rather than a vendor – because you need people to truly invest in you.’
That need to ‘build rapport from day one’ is obvious but crucial, says Hartropp. ‘If you’re a permanent IRO going into a new role, you get three months to learn the company and foster those relationships internally with your stakeholders,’ she points out.
‘If you are an interim from day one, you have to go in with gravitas and make your mark – so you need a really strong internal rapport and, in particular, getting management to trust you as soon as possible is key, which not everyone can do.’
Chesler says the flexibility is one of the main attractions. ‘You do need to make an impact while you’re there but, at the same time, be comfortable knowing that the initiatives you bring in will probably be completed by somebody else,’ he explains, adding that being able to pass on relationships with investors and analysts is an important part of this.
For Melia, it marks a fantastic opportunity for IROs to grow the breadth of their experience, particularly if joining a company undergoing a specific issue, such as an activist presence, an M&A transaction or a spin-off. ‘It’s a great way to get to know a different sector, to add to your IR resumé and to broaden your relationships, as you’ll be working with different sets of brokers and advisers,’ she points out.
‘It could take so many forms, and I think that’s what’s exciting,’ concludes Hartropp. ‘There’s no getting bogged down with the cyclicality of writing an annual report over your Christmas holidays every year.’