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Hiring an external IR firm is the best option for companies that want to go public but have limited access or resources in the financial world and the investment community.
An IR firm can help you attain a number of private and institutional investors for your business due to the level of experience and connections they have within the sharemarket or the wall street.
Being the specialists of Investor relations that they are, IR firms can take care of all the IR functions which in the case of an in-house team would fall on the shoulders of your top executives in the management such as CEO and CFO.
Benefits of Investor Relations!
Investor Relations, which is a part of public affairs aka public relations, is mainly about managing your relations with investors and stakeholders that have invested, or want to invest in your company.
They are usually managed by a team of IR professionals who are responsible for providing them an accurate account of your company in a timely, transparent, and trustworthy manner. This in turn helps both individual and institutional investors to make well-informed decisions on whether your company offers any investable value or not.
Apart from getting you the investors, a good IR team would also help you:
- build a reliable shareholder base
- create long-term sharemarket value
- ensure easy fundings and capital in the future
- minimize the over-all cost of capital
- earn long-lasting credibility in the investment world.
(Source: Corporate Finance Institute)
As you can see, IRs are pretty much like the face of your company in the capitalist market. The point of contact for all your investors, shareholders, and the wall street to get in touch with you, and vice-versa.
Therefore, when choosing an IR consultant, it’s of utmost importance to ensure that they are well-regarded in the market, as well as efficient enough to tackle the wide array of functions that come before, during, and after the Initial Public Offering better known as IPO.
On that note, lets take a closer look at the key factors that you should consider before hiring an IR agency based on some of the most critical aspects of investor relations as well as its associated challenges.
Tips for hiring an IR agency
1. Conduct a thorough research on the IR consultants you’re interested in starting with their area of expertise.
The “street” is full of such consultants that claim to be experts in investor relations but have more to do with PR than IR.
Remember, IR, although a sub-department of PR, is way different than managing relations with the public. It’s about the investors and the stakeholders who unlike the public would have a significant say in your business upon investing.
So always look for someone who has substantial experience or specialization in the field of investor relations. Here are some of the hard-hitting questions that you can ask or figure out:
- Are they IR oriented?
- Do they have the knowledge of your field?
- What kind of connections they have in your industry?
- Are they well-versed with wall street?
Clarifying these queries during the initial process would give you a deep insight into the experience, expertise, and specialization of the IR firm.
2. Go for quality over quantity
Like I said, a number of PR companies claim to be IR experts without having the right skills to back it up. Many of these firms tend to be quite expensive due to the long road shows that they usually go out on in search of potential investors. Moreover, a majority of these on-road meetings are of poor quality and of no avail. Instead it can seriously hamper the image of your company and jeopardise the public offering.
Therefore, when hiring an IR firm, make sure to go for someone who’s driven by knowledge, facts and stats. Someone who understands the market well, plus knowns all the major and emerging players in it.
3. Make sure they understand your strategic needs and goals
Understanding your company, business values, finances, strategic and tactical needs, as well as your short-term and long-term goals is pretty important for an external IR agency to be able to get you the desired and reliable lot of investors.
It’s only when they’ve understood your business well that they can provide a real-time account of your company to financial analysts for further valuation.
4. Take a deep look at their financial and communication expertise
Financial knowledge and communications skills are two of the most important qualities of good IR professionals. But it’s not only the skill, but also the will to communicate with the client or the company, as well as the investors that separates a professional IR consultant from an ordinary PR.
An efficient IR firm should be more than willing to maintain the flow of information between the company, investors, analysts, and shareholders in a consistent and transparent manner.
They should be able to convey what wall street has to say to you in the language you understand, and not necessarily in the financial terms. In the same way they should also be able to translate back your values, interests, positions, and answers in the language that wall street understands, things such as profit, goals, earnings, and shares.
5. See if they can handle the most difficult aspects of IR
IRs usually have a lot to deal with on daily basis starting from keeping a close eye on the fluctuations in the share market. But that’s not the biggest challenge for them.
According to Deloitte, some of the most challenging aspects of investor relations that IR departments have to face are:
- working with the C-suite (CEOs and CFOs)
- minimizing the gap between management and analysts
- communication
- disclosure
- and dealing with increasing regulatory scrutiny
And that’s where their knowledge, skills, intelligence and the will to respond in a timely, transparent, and trustworthy way comes into picture. Traits that you should never miss when hiring an external IR agency for your IPO.
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