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Role of the investor relations firm
Montieth Illingworth, Tristan B. Peniston-Bird and Jamee Lubkemann,Gavin Anderson & Company
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How an IR firm can assist a company in preparing for a successful IPOand in assuming the responsibilities associated with being a publiccompany in the after-market.
 
Aguide for European companies to listing on the U.S. securities markets 61
Entering the U.S. capital markets is anexcellent way for European companies tobroaden and diversify their internationalshareholder base, increase liquidity in theirshares, add flexibility in raising capital andincrease competitiveness against U.S.-listedpeers. In order to enter the U.S. market, it isessential for prospective American DepositoryReceipt (ADR) issuers to understand theimportance of, and work with, an investorrelations (IR) firm to aid in the ADR process.To provide consistency throughoutthe ADR campaign, IR advisors shouldbe involved at every stage of the process fromthe development of the issuer’s valueproposition and its prospectus to investorpresentations and the structure of the pricing,as well as the coordination of the syndicatebanks that market the issued stock,and the marketing and public relationsefforts. Tounderstand the need for IR firmsduring an ADR program, the following chapterpresents an overview of the role that anIR firm plays in consulting European issuersthrough a U.S. listing, before, during and afterthe issuance. This includes a description ofthe benefits of general counseling that IRfirms can provide, as well as the differentstages of a listing and an IR firm’srole ineach. The following list is a summary ofservices that IR firms can provide toEuropean issuers:
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General counseling
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Developing a U.S.-focused (and legal)message
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Access to the U.S. markets
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Cost savings
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Pre-listing activities
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Goal setting
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Financial community
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Media
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Internal communications
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Listing day events
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Post-listing communications
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Investment community outreach
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Quarterly results announcements
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Ongoing messaging and communication
Gener
 
al counseling
The benefits to European issuers of using anIR firm are invaluable. IR firms enhanceclients’ financial strategy throughout TheNASDAQ Stock Market listing process througha tailored IR strategy and program thatincludes the following activities:
•
Investment thesi
 
s devel
 
opment–Developing an investment thesis and keymessages for IR constituencies (retail andinstitutional investors, sell-side andindependent securities analysts, ratingsagencies and financial regulators, etc.)that are aligned with the issuer’s corecorporate and business proposition.
•
Corpor
 
ate devel
 
opments andresult
 
s announc
 
ement
 
s– Developing acompelling company announcement andfinancial reporting strategy that conveysfundamental messages in vivid detail andwith high impact, leveraging the full rangeof mandatory and other collaterals such asthe 10-K, 10-Q, results presentations, andannual reports.
•
Investor r
 
elations c
 
ont
 
act progr
 
am–Reaching out to the world’s capitalmarkets by developing a roadshowprogram that targets the sell- and buy-sideconstituencies in all global financialcentres, either as part of the client’sfinancial calendar, to leverage a sectoror industry event, or for corporatedevelopment.Many of the top IR firms have anextensive range of cross-border experience inthe challenges facing issuer’s stakeholders,customers, and constituents. These broadexperiences will be useful in aiding Europeanissuers in developing the right valueproposition in the U.S.
Developing a U.S.-focused (andleg
 
al) me
 
ss
 
a
 
ge
For European issuers wanting to tap the U.S.market, listing on a U.S. exchange is amanagement challenge. It is important thatissuers do their research and understand the
Role of the investor relations firm
 
62A guide for European companies to listing on the U.S. securities marketsRole of the investor relations firm
dynamics of the U.S. marketplace beforeventuring into the U.S. It may seem obvious,but there are many cultural and structuraldifferences between U.S. and Europeanmarkets. In making the decision to pursue aNASDAQ listing, a partnership with an IRfirm can support European issuers inunderstanding these differences anddeveloping communications programsaccordingly. IR can serve as the connectionbetween the U.S. capital markets and theissuer’s senior management, as well asdriving underlying investor demand forits shares.In general, IR firms can advise Europeanissuers on U.S. cultural norms. For example,when on a roadshow in the U.S., institutionalinvestors often expect the issuer’smanagement to meet them in private in theiroffices. In many European markets,institutional investors will generally meet theissuer’s management at group briefings, oftenheld at the underwriters’ offices. In the U.S.,marketing your ADR is a sales effort andEuropean issuers must “sell” their companyto investors. In addition to your bankers, IRadvisors can be the front-line salesmen forthis purpose. In addition, when there is noopportunity for management to meet investorsface-to-face, with an IR firm in place, anissuer will have specialists on the ground whounderstand the mechanics of their business inboth the issuer’s home country and in theU.S., and who can explain the issuer’s storyclearly and persuasively to U.S. investors.IR advisors can also help Europeanissuers to be prepared with “appropriate”programs – each tactic communicates to theright audience in the proper manner. In theU.S., it is important that materials distributedby European issuers are denominated in U.S.dollars, and phrased (when possible) in U.S.market language. In addition, campaignsshould be straightforward. Americans areoften more forthright than those from certainEuropean cultures. Videos, glossy and showymaterials, and marketing materials are readilyaccepted and generally expected – IRadvisors will help manage these materials.IR firms are communications experts infinancial markets and are able to advise whenit comes to internal financial reportingprocesses. They can help issuers satisfy U.S.market (and external investor) requirements.For example, all accounts must be stated inU.S. GAAP and the timing and reporting ofthese accounts must comply with both thehome country and U.S. securities regulations,and with NASDAQ rules. For instance, in theU.S., issuers cannot conduct promotionalactivity, except at certain times, during aregulatory quiet period. There are also severalrestrictions on infor-mation that issuers areallowed to distribute. In some cases, issuersmay even have to stop giving information tocertain colleagues because they are ordinaryemployees of the issuer and, therefore,potential investors. IR firms can counselEuropean issuers on all of these policies.They will ensure that European issuers arealigned with U.S. regulations and with theirU.S. peers, enhancing the ease with whichEuropean issuers can be analyzed by theU.S. markets.
Acces
 
s to the U.S. m
 
arket
 
s
Another benefit in partnering with an IR firmin the aftermarket is the relationships that IRfirms already have forged within the U.S.market. IR advisors will likely have access toinfluential corporate finance and industryanalysts at their respective firms. Theseexisting relationships are especially beneficialto potential issuers in terms of targeting – it iseasier to reach out to the appropriate analyst,focusing attention on the potential issuer.Well-rounded IR firms also have pre-existing media contacts and an understanding
IR can serve as the connection between the U.S. capitalmarkets and the issuer’s senior management, as well asdriving underlying investor demand for its shares.
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