In the second of a new regular series on IR basics, a veteran IR professional shares first-hand best practice knowledge and advice on investor targeting with Tim Human
Successful IR involves being a master matchmaker. IR teams need to identify and engage with investors that might be a good fit for their company’s shareholder base. Most of the time, that means seeking out long-term, active investors that share the vision of management. But it can also refer to other goals, such as adding retail investors to boost liquidity.
The benefits of effective investor targeting are manifold. It helps companies maintain a shareholder base that suits their current and future profile. It helps avoid risks in the share register, such as too much fast money or excessive concentration. It ensures management time is allocated to the most important investor meetings.
Camilla Bartosiewicz, chief communications officer at Altus Group, a market intelligence provider for the commercial real estate industry, is an award-winning IR professional with more than 15 years’ experience. Bartosiewicz says the first place to start with investor targeting is to identify the most likely buyers – which often means looking at your existing shareholder base.
‘I start by analyzing whether my shareholder mix is the right one for the company – for right now as well as the next stage of our evolution,’ Bartosiewicz tells IR Magazine. ‘Over the years, I’ve come to appreciate that having the right investors that align with our corporate strategy is very constructive and helps us withstand periods of market volatility.’
Investor relations teams can find opportunities for existing shareholders to grow their position, she adds: ‘Clearly, there’s already interest. We look at who is underweight and has the potential to add more.’
Goals and targetsThe next stage is setting objectives and identifying targets. Depending on the circumstances, companies may have overarching goals for their shareholder base, such as adding institutional investors, boosting liquidity, growing international exposure or attracting ESG-focused funds.
Altus went through a transformation, moving from its legacy professional services orientation to becoming a technology company with a growth profile. To support this change, Bartosiewicz focused on growth and Garp-focused funds and tech investors that understood the business model. There was also a push to expand ownership in the US market, the world’s deepest pool of capital.
To identify specific targets, Bartosiewicz recommends companies look at a broad range of criteria.
‘On a tactical level, I would start with an analysis of how your company is positioned against its peers, whether you do that by sector or financial profile, to try to understand whether you’re in the sweet spot of the investors you’re trying to target,’ she comments. ‘We also think about which investors might impact our valuation. Other considerations include location, industry sector allocations, peer ownership and investment style.’
For many years, Bartosiewicz has operated as an IR team of one. With a lean setup, she says technology provides invaluable support.
‘I leverage technology for a combination of screening and matching,’ she says. ‘I couldn’t imagine being able to do [the job] efficiently without it. Once you have established your criteria, within minutes you’re equipped with information to build a target list.’
Marketing planTo execute their targeting strategy, IR teams typically set up an engagement calendar, featuring key events such as investment conferences, results announcements, investor or analyst days and non-deal roadshows.
Traditionally, the sell side operates as a key facilitator of meetings with investor targets, although in recent years this has been increasingly supplemented by firms and investors reaching out to each other directly.
‘With the move to virtual meetings post-pandemic, there has been a notable trend of buy-side investors engaging directly with companies,’ says Bartosiewicz. ‘It can be more efficient to cut out the middleman and schedule a quick call. But I maintain that the sell side will always be a critical conduit to investors. The buy side still depends on sell-side research and conferences for new investment ideas.’
Tracking progressThere are various ways for IR teams to monitor the progress of their targeting efforts. It can be tempting to focus on quantitative measures, such as the number of meetings held or conferences attended.
While this is important to track, experienced IROs often look at softer measures to judge success, such as quality of meetings and effective use of management time.
For Altus Group, key metrics have focused on the long-term objectives for the shareholder base: more institutional investment, more growth and Garp funds and greater penetration of the US market.
More generally, Altus tracks valuation multiples and whether target investors eventually become shareholders to see whether time is being spent wisely. The company also uses investor perception studies to assess sentiment and investigate whether the corporate message is resonating with new owners.
‘While targeting can be a complex process, the ultimate goal is simply to find investors that are the best fit for your business’, says Bartosiewicz. ‘It’s about reaching a willing audience that has the highest potential to become your shareholders.’
