Hiring an investor relations consultant is an excellent idea for firms that do not have the resources to build an adequate in-house investor relations function, or which have few contacts in the investment community. They can provide a wide array of services, which include the following:
- Analyst coverage. Consultants usually have contacts with a significant number of analysts. They can present the company to the subset of those analysts whom they feel will be most likely to initiate coverage.
- Board advisor. The board can appoint a consultant to be its investor relations advisor. By doing so, the board gains an independent perspective on the effectiveness of their company’s investor relations activities. The consultant could also engage in various projects for the board, such as a survey of major investors.
- Communication materials. Consultants can formulate the entire range of company communication materials, including press releases, conference call scripts, annual reports, fact sheets, and investor presentations. They can also provide advice regarding the types of communication to use in the event of mergers, restatements, or proxy battles.
- Crisis communications. Some consultants specialize in dealing with crisis situations. For example, a company may need advice in dealing with a widely-reported product failure, criminal investigation, or hostile takeover. These consultants have experience in dealing with the media that can mitigate the impact of these events.
- Disclosure knowledge. Consultants should have an excellent knowledge of the SEC’s disclosure rules, and can assist a company by setting up the policies and procedures needed to ensure compliance with those rules.
- Investor days. If a company conducts an investor day, where it brings an array of company managers together for presentations to the investment community, then a consultant can assist with invitations to analysts and investors, as well as manage the event logistics.
- Investor feedback. Consultants can conduct periodic surveys of selected investors in order to obtain feedback about their perceptions of the company.
- Presentation coaching. The quality of a road show is founded upon the excellence of the presentation materials and the abilities of those executives presenting the information. Consultants can offer considerable advice to upgrade the contents and format of the materials, and can improve the speaking capabilities of the presenters.
- Press releases. A common consultant task is writing press releases, or at least reviewing those releases written by company employees. The result should be polished and concise releases.
- Public offerings. The area in which consultants offer the greatest return for their fees is in the area of public offerings. They can assist in setting up road show meetings for an initial or secondary public offering, as well as shepherd a presentation team through the multitude of meetings needed to complete an offering. Several of the largest consulting firms make this their primary area of expertise.
- Regulatory updates. Some consultants monitor the most recent regulations promulgated by the Securities and Exchange Commission, and will issue periodic updates to their clients regarding how these changes will impact their investor relations operations.
- Valuation analysis. Consultants can offer advice regarding the establishment of a comparative peer group, and other methodologies for creating a valuation analysis.
- Web site updates. Some consultants employ specialists who either design investor relations web pages themselves, or who can provide detailed advice regarding the contents, presentation, and navigation elements of such pages.
Some of the larger investor relations firms advertise themselves as full-service shops, offering all of the above services. However, even the largest firm realistically offers just one area of specialization, and has backfilled its core strength with additional staff to give the appearance of broad expertise. There are two main areas of specialization, which are capital raising and public relations. The largest firms have realized that they can charge the highest fees if they specialize in initial and secondary public offerings, since clients will raise more funds by using their services. Other firms have a strong public relations focus, and so specialize in communications materials, web site updates, presentation coaching, and so on. Because of this level of specialization, a company should consider employing at least two investor relations firms.
Consultants may also specialize in a specific industry, such as technology, health care, or energy. Some industries have special terminology, or are only followed by a small number of analysts or investors, so it really makes a difference to employ a firm with deep industry knowledge and contacts. Be sure to query prospective consultants about their clients, to discern the industries in which those clients are clustered.
A micro-cap company may find that a few local experts with specialized skills are sufficient for their needs. However, larger companies that need expertise in a broad range of skills will need the services of a more established organization with multiple staff. Sole proprietors may agree to an hourly rate, but the larger firms will want a monthly retainer that starts in the range of $25,000 and increases precipitously from there. A few firms will accept stock instead of cash, but they are a small minority.
In short, any part of the investor relations function can be outsourced, though few firms can handle the entire array of activities. Instead, a company may find that it must employ several firms to ensure that it has access to a sufficient level of expertise.