SEPTEMBERMAY 20142011 the voice of the investor relations profession

THE FOREST & THE TREES IR professionals in the paper and forestry industry must see the big picture while keeping their eyes on all the little details that go into shaping it.

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MAY 2014

President/CEO and Publisher Jeffrey D. Morgan Vice President, Communications The Forest and and Practice Information & Editorial Director the Trees Matt Brusch IR professionals in the paper and forestry Editor-in-Chief 6 industry must see the big picture while Al Rickard keeping their eyes on all the little details [email protected] that go into shaping it. Advertising Sales By Apryl Motley Mike Hyatt Manager, Professional Development 703-562-7684 [email protected]

Art Direction Thor Design Studio [email protected] Private Lessons Contributing Editor Linda Daily Even when your company is private, 10 investors still need to hear your story. Contributing Staff Private company IROs explain how. Tammy K. Dang James Taube By Margo Vanover Porter

Letters to the Editor IR Update welcomes letters to the editor. Please send feedback to arickard@ associationvision.com.

About NIRI Founded in 1969, the National Investor Relations Institute (www.niri.org) is the professional association of corporate officers Stocks for Sale! and investor relations consultants responsible IROs are typically not salespeople. Yet there for communication among corporate management, shareholders, securities analysts 14 are reasons to consider incorporating a and other financial community constituents. sales approach into investor relations. NIRI is the largest professional investor By Sallie Hyman relations association in the world, with more than 3,300 members representing over 1,600 publicly held companies and $9 trillion in stock market capitalization. NIRI is dedicated to advancing the practice of investor relations and the professional competency and stature of its members. DEPARTMENTS

About IR Update IR Update is published monthly by the 4 At the Bell 20 NIRI Now National Investor Relations Institute as a A Compelling Read • Quick Takes service to its members. ISSN 1098-5220 By John Chevalier • Respect our Community at the NIRI Annual Conference © 2014 by the National Investor • IR Research at a Glance Relations Institute. All rights reserved. 18 Webinar Report • Professional Development Calendar For Change of Address, Contact: Activist Storms NIRI–IR Update How to prepare for and weather 22 Spotlight on Chapters 225 Reinekers Lane, Suite 560 activist turbulence. Alexandria, VA 22314-2875 USA Mastering IRO Skills for Career Advancement phone: (703) 562-7700 By Tammy K. Dang The NIRI San Francisco chapter hosted a panel of experts to [email protected] discuss leveraging skill sets to enhance career opportunities. www.niri.org By Brad Mills

IR update MAY 2014 3 Editorial Advisory Board AT THE BELL Darin Arita ING North America

Mike Beckstead A Compelling Read Stillwater Mining Company Marj Charlier Hala Elsherbini Investor Relations Consultant elcome to your May 2014 issue of IR Update, which offers an intriguing Halliburton Investor Relations and educational set of feature articles. Hala Elsherbini HalliburtonLaura Gagnon Investor Relations Our cover feature article is a piece focused on the paper and forestry The Mosaic Company W Laura Gagnon industry. While my company is in the consumer products industry, I enjoy reading about TheClint Mosaic Halverson Company IR in other industries … learning about the different challenges my IR colleagues face and Extra Space Storage Inc. Clint Halverson commiserating with them on the similarities. ExtraJulie Kegley Space Storage Inc. Next, there is a unique peek behind the curtain of IR in companies that have gone pri- Tyson Foods, Inc. Julie Kegley vate. While the ownership structure may change, the challenges of preparing and delivering AndreaTyson Foods, Passalacqua Inc. The New York Times Company a transparent and compelling story about the results and prospects of a business remain Dave Parker the same. HeatherMEDNAX, Rowe Inc. Finally, while success in IR certainly requires skills in finance, marketing, and communica- AndreaKythera PassalacquaBiopharmaceuticals, Inc. tion, the “sales” aspect of our responsibilities is often an area that isn’t overtly discussed. The TonyThe New Takazawa York Times Company article “Stocks for Sale!” includes interesting examples and practical advice that can help you HeatherEMC Corporation Rowe (and me!) make interactions with investors, analysts, and management even more impactful. Kythera Biopharmaceuticals, Inc. Shifting gears, the NIRI Board of Directors had a very productive meeting in early March. NIRITony TakazawaBoard of Directors EMC Corporation We’re making great progress on all of the major initiatives we’ve undertaken, including: John Chevalier, NIRI Chairman • Research and development of a new NIRI website. NIRIThe Procter Board & of Gamble Directors Company • Significant progress on the creation of the NIRI IR certification program. David Calusdian Hulus Alpay, NIRI Chairman • Finalization of NIRI’s advocacy platform related to key topics for issuers and those Sharon Merrill Associates of the Securities and Exchange Commission (by virtue of the mandates given to the Medidata Solutions Worldwide Jane Okun Bomba Jane Okun Bomba SEC by Congress). IHS Inc. IHS Inc. • Our work to define the set of strategic priorities that will be a guide for NIRI for the Robert Burton next three years or more – most of which will be a natural evolution from our current Robert Burton Lambert, Edwards & Associates OneNIRI strategic plan. JohnRuth ChevalierCotter I hope you’ve made your plans to attend the NIRI Annual Conference in June in Las TheAdvanced Procter Micro & Gamble Devices Company Vegas. The Annual Conference Committee is preparing an exciting and informative educa- RuthMark CotterDonohue tional program that is sure to deliver on the conference theme: “Extreme IR: Fast, Furious, ImpaxAdvanced Laboratories, Micro Devices Inc.

and Highly Connected!” AnneMark DonohueGuimard As always, please feel free to call or e-mail me with any questions or thoughts you have FINEOImpax Laboratories, Investor Relations Inc.

about NIRI. Also, please know that your board and staff are working hard to further NIRI’s ValerieAnne Guimard Haertel mission of “advancing the practice of investor relations and the professional competency FINEOState Street Investor Corporation Relations Dennie Kimbrough and stature of its members.” Dennie Kimbrough Microsoft Corporation See you soon in Las Vegas!! Microsoft Corporation Mary Beth Kissane Felise Kissell Walek & Associates HSN, Inc. Felise Kissell HSN,Angeline Inc. McCabe Health Net, Inc. Andrew Kramer InteractiveJeffrey D. Morgan Data Corporation National Investor Relations Institute Jeffrey D. Morgan John Chevalier NationalNils Paellmann Investor Relations Institute T-Mobile US Chairman, NIRI Deborah Pawlowski Director of Global Investor Relations KeiDeborah Advisors Pawlowski LLC The Procter & Gamble Company MichelleKei Advisors Levine LLC Schwartz [email protected] Moriah Shilton Tessera Technologies, Inc. Charles Triano 4 MAY 2014 IR update Pfizer Inc. The world’s most advanced IR webhosting. Designed for desktop,tablet and mobile. Free migration.

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1440 Broadway, 23rd floor, Suite 2319, New York, NY 10018, USA .INVESTIS THE FORESTAND THE TREES IR professionals in the paper and forestry industry must see the big picture while keeping their eyes on all the little details that go into shaping it. By Apryl Motley

6 MAY 2014 IR update Just imagine: You and your investors spending time together in the forests of Montana or Missouri. This scenario probably seems unlikely to most IROs.

But it’s very much a reality for John B. Hobbs in his role as vice president of investor relations for Plum Creek Timber, one of the largest landowners in the nation with approximately 6.3 million acres in major timber-producing regions. “Every 24 months or so, we’ll do a timber tour, and we’ll invite analysts and investors to spend a day in the woods with us,” Hobbs says. These tours, as well as other events, are important for educating investors about the value Plum Creek has to offer. “A lot of investors we work with are used to dealing with depreciating assets like a manufacturing facility,” Hobbs says. “Most have never dealt with an asset that physically grows over time without significant reinvestment. “There are some core concepts that we need to get across to them early on,” he continues. “At the end of the day, most investors understand that forestry remains an important part of the economy. They understand that the industry is viable although the uses of products may have changed.” Within the last few years, change seems to have been the only constant in the forestry and paper sector. When Perry Grueber began his tenure as director, investor relations, at Wausau Paper seven years ago, the company’s revenues were close to $1.2 billion; today, due to purposeful restructuring, they are $349 million. “Two of the company’s former markets have faced challenges: (1) demand within the printing and writing business has declined significantly due to the [the rise of] electronic distribution and decline in demand for printed materials, and (2) our technical specialty paper business,” was impacted by the weakness in the global economy and new competition from Asia, Grueber explains. Over the last three years, Wausau restructured the company to exit these two market segments and focus on its towel and tissue business, which according to Grueber, is “a highly profitable and growing business.” Before Kathryn McAuley became vice president, investor relations, for Weyerhaeuser Co. in 2001, she spent 14 years as a forest products security analyst covering industry trends like the consolidation of companies. Her time as an analyst provided great background for her current position. “I had a good understanding of the industry and the players,” she says. “I knew how they were viewed by investors.” McAuley says of her current role, “In some ways, I’m a still a sell-side analyst, but for one company instead of many companies.”

IR update MAY 2014 7 IROs in the paper and forestry industry IR INSIGHT A Seat at the Table sometimes take a variety of routes to Kathryn McAuley, vice president, “I’m very fortunate in that I’ve been entering their profession, but once in place, investor relations, Weyerhaeuser included in internal meetings and other their goal is the same, crafting the messages Co., began her career as deputy activities that help me understand the that best communicate value to their com- director of corporate planning for company’s strategic direction,” McAuley panies’ investors. St. Regis Paper Co. She offers this says of her tenure at Weyerhaeuser Co., advice to those interested in IR which is one of the world’s largest private careers in this sector: Rotating Roles owners of timberlands. • Learn about the industry by Jay Royalty is the fourth person to serve “It’s important for IR to be privy to working in it. “It’s really helpful to as vice president, investor relations, at what’s going on,” she continues. “You may have some external experience,” International Paper Co. in the past decade, she says. “Consider taking a posi- not be able to discuss it, but you need to and he won’t be the last. tion in a strategic planning area of know what’s evolving from a strategic per- About 10 years ago, the company, which a company.” spective, so that you can begin thinking produces uncoated papers and industrial about how to communicate this informa- and consumer packaging, changed its IR tion to investors.” model so that executive level managers “The biggest challenge I faced was getting That’s the part of her job she loves: “I rotate through the position every two to up to speed quickly on the broader scope find it very rewarding to dialogue with four years. of the overall company as well as all the investors as I see them understanding our “There’s really no better role in the com- various IR rules and regulations,” Royalty messages about what we do and why.” pany for up-and-coming executives to get says. “I had to quickly learn the boundaries McAuley recognizes that everyone familiar with all aspects of the business that on what I can [say] and how I can say it.” wants “more information faster.” She says we wouldn’t have exposure to otherwise,” When International Paper’s CEO and of analysts, “They are doing much more Royalty says. CFO first approached him a year ago detailed modeling, and some of that is Having served in a variety of general about taking on IR, “it was foreign to me an outgrowth of more information being management positions during his more and not something I had thought about available to them.” than two decades at International Paper, before,” he admits. She knows what it’s like to be on that Royalty says the experience “brings cred- As Royalty has become more comfortable side of the fence, so to speak, and feels ibility and depth to the IR role.” At the with his position, he finds it “incredibly that her experience as a sell-side ana- same time, he acknowledges that he dynamic. You’re in the middle of all the lyst has been invaluable in her current “never had any IR experience before major decisions the company makes, and position. “Investors have a tough job,” coming into this job. you get to see all perspectives.” McAuley offers. “They are under pressure to get their modeling right. If you’ve been IR INSIGHT on that side and seen those pressures, you understand it better.” Jay Royalty, vice president, investor relations, International Paper Co., offers In fact, she believes that analysts are “a two pieces of advice to anyone considering an IR career in the paper and source of IR professionals that’s overlooked. forestry industry: You know your industry, so your ramp-up • Don’t spend too much time behind your desk. “Engage with stakehold- ers both internally and externally,” he says. “The more perspective you get early time with the company is faster. You already on in the job, the more effective you’ll be at putting your finger on the pulse of know the investor base.” the company.” • Keep the lines of communication open with shareholders. “If you’re Restructuring and Resizing not communicating regularly – at least every three to four weeks – anxiety can After being head of IR for three progres- creep in,” he observes. sively larger companies on the NYSE, as well as experiencing a restructuring-driven

8 MAY 2014 IR update IR INSIGHT career disruption, Perry Grueber accepted the opportunity to lead IR at the then mid- According to Perry Grueber, director, investor relations, at Wausau Paper, as the cap Wausau Paper. paper and forest products industry continues to go through a period of significant With more than 20 years as an IR profes- consolidation, the number of IR positions has declined and that trend will likely continue. Still, he offers this suggestion to those interested in the sector: sional, he sees the IRO’s role as “a unique • Recognize the long history of the market’s capital investment in the position within the corporation to pro- sector. “There’s a great deal of knowledge on the Street about the paper and vide Street insight into the company and forestry products industry,” he says. “Often analysts will revert to history, which industry and bring diverse information to isn’t necessarily the best indicator of the future of the business. the company’s strategic thought process. “I appreciate the diversity of opinions and “Spend time understanding not only the recent past, but the deeper history of the the interaction with people to help improve industry,” he continues. “These trends continue to play a role in how people view the performance and prospects of my com- and value companies.” pany,” he continues. Prior to Grueber’s arrival, Wausau’s CEO and CFO had handled IR interactions with “We were often the employer of choice IR INSIGHT outside investors. However, the company for local residents, and those long con- “Like a lot of IR people, I had no was entering a period of dramatic change, nections to these communities made plan to be in IR,” says John B. and [executives] realized they “would need communicating change difficult at times,” Hobbs, vice president of investor more availability from a company representa- Grueber notes. relations for Plum Creek Timber. tive as that happened,” Grueber explains. Once he made the decision to enter “When I came on board, my mandate An Intellectual Investment the field, he recognized a key area from the CEO at that time was to make “Plum Creek’s biggest physical asset is that he wanted to improve: • Hone your written commu- sure all shareholder inquiries were answered a forest,” says Hobbs, who has headed up nication skills. “That was my big promptly,” he says, “and increase the pace the company’s IR effort since 2001. “I am challenge,” he says. “I had to get of distributing information.” not aware of any other asset that biologically accustomed to producing earnings During Grueber’s tenure, the company grows over time and operates this way in releases, conference call scripts, has attracted more sell-side coverage and the market.” [and so forth].” expanded its institutional shareholder During his first few months there, the base. In addition, he says one of his priori- company doubled in size and was added ties has been maintaining long-term share- to the S&P 500. As he was stepping into hours,” Hobbs explains. “We respond to holder positions. his new role, Plum Creek was stepping up every investor inquiry within 24 hours, “We have shareholders that have been its visibility. regardless of size.” invested in the company’s common stock Hobbs says he is “intellectually chal- From his perspective, if investors allocate for well over a decade, and my challenge lenged on a daily basis” as he talks with their intellectual capital in the same manner was to retain those positive relationships potential investors around the world to as they do their financial capital, indexing is while inserting myself into the dialogue educate them about how Plum Creek might a common practice: “They’re interested in between them and the company.” fit into their view of the investment world. Plum Creek and have made a significant Further, he says that while long-term “I very much view our role as educators,” investment in learning about us,” he says. investors understand the strategic direction of Hobbs says. “We help our shareholder “It’s critical for us to respect their intellec- the company, Wausau’s pragmatic and appro- base get the information [it needs] to make tual investment and how valuable their priate decision to exit two of its business informed investment decisions for clients.” time is.” IRU segments had implications to local economies In this regard, he believes timeliness as the company was the largest manufacturing is critical. “We track our inbound calls Apryl Motley is a freelance writer based in employer in several communities. and respond to the vast majority in four Columbia, Maryland; [email protected].

IR update MAY 2014 9 Private Lessons Even when your company is private, investors still need to hear your story. Private company IROs explain how.

By Margo Vanover Porter

10 MAY 2014 IR update corporate development for Interactive Data Fortunately, Haws’ IR team members Don’t go dark. Corp., which was acquired by Silver Lake could dispel any rumors head-on because That’s the first lesson that IROs learn and Warburg Pincus in mid-2010. they understood the mechanics of the when their companies opt to go private. “We took on a fairly significant level of capital structure and could provide insight “There is still the need to communicate to debt once the transaction was completed,” about the actual situation. “Our guiding investors, even though they are bond inves- he continues. “We have a new constituency philosophy was ‘If we don’t define Freescale tors,” says Mitchell Haws, vice president of we communicate with on a consistent basis, and take our message public, someone will investor relations, Freescale Semiconductor. the debt-holder community.” do it for us.’ “We wanted to keep the disclosure disci- Interactive Data adheres to a communica- “In most cases, the outcome is not pline really tight. We thought, ‘Hey, we tried tion and disclosure routine that is similar to very good when someone else – whether to perfect the dance move when we were that of the firm’s publicly held counterparts. it’s suppliers, debt investors, customers, public. Let’s not get out of practice.’ We For example, the company’s debt covenants or even our employees, who were under- wanted to make sure all the controls and the require voluntary filings with the Securities standably nervous during that cycle – mentality of good disclosure and transpar- and Exchange Commission. In conjunc- defines the message.” ency weren’t lost.” tion with its quarterly financial results, David Mehok, executive director, Dell, According to Haws, in the fall of 2006, Interactive Data holds a quarterly conference adds that not only do you need to tell four private equity sponsors made an offer call with its debt holders. your own story – but you also need to tell to buy Freescale from the public market While a few companies may completely it consistently. at $40 a share. “I was very involved in withdraw from the public eye, Haws deter- “When you go into a private world, that, working with investors to help them mined that moving to the dark side was not there’s a tendency to want to put out infor- understand the nature of the offer, doing the in his company’s best interests. “The cost mation that is all positive,” he says. “That proxy solicitation to make sure shareholders was way too high,” he insists. “We made may work for a couple of quarters, but in approved the deal. In addition to raising the the decision to continue to be very proac- talking to others who have gone through funds to go private, you’re raising a signifi- tive with all of our audiences.” this process, they will tell you it’s extremely cant amount of debt, which means you’re important to be consistent in messaging. doing a road show, just like you would for Why Tell Your “If you find a few key metrics that you an IPO. The difference is you’re dealing with Company’s Story? believe will be good benchmarks for how debt investors to raise debt capital.” Whether a company is public or private, well you are making progress along your Freescale’s tale is a bit unusual in that IROs agree on this truism: If you don’t tell strategic journey, report them every single this company went full circle – from public your story, someone else will. quarter, good or bad. Otherwise, over a to private and then back to public again. Haws recalls the many conversations he period of time, investors will see that the “Every buyout is unique with its own per- had with everyone from investors to the way you are communicating is self-serving sonality and set of attributes,” Haws says. news media in 2009, when the bottom fell and lacks transparency.” “We always knew in the back of our minds out of the stock market and banks tight- Dell, which in February 2013 announced that we would go public again at some time ened lending standards. “It was an inter- a deal that closed this past October, con- in the future. Our IR strategy had that in esting time to do IR at a private company tinues to ensure its message is widely heard. mind. We obviously could have gone in because when you go private your capital “You don’t want to put yourself in a situ- a different direction, but we felt it would structure changes. You take on a lot of ation where your competitors are defining be very difficult to go dark and then try to debt. Leverage goes up. who you are because you aren’t out in the reemerge to go public again.” “It’s a different financial model, and you public marketplace,” Mehok emphasizes. Andrew Kramer seconds the notion that look different as a company in terms of “While Dell may not be talking about IROs of private companies need to keep your balance sheet. For many people, that our financial results going forward, we are communicating with their constituencies. translates into more risk. What we found certainly going to be out there as an IR team “While we don’t have equity investors any very quickly is that our competitors tried to talking about key areas of technology and longer, we now have debt holders,” says use that to their advantage, to use that as a being very proactive in making sure the the senior director of investor relations and wedge with our customers.” marketplace hears our message.”

IR update MAY 2014 11 Determine Your Own Destiny When a company goes private, one of will change,” Kramer emphasizes. “The Another lesson for IROs whose compa- the first steps an IRO should take is to get change will start the moment you issue nies are going private: Determine how – or to know his or her new constituents. “You the announcement that you’re going to be perhaps if – you will fit into the company’s need to understand the way debt inves- acquired, and it will continue until the day new capital structure. tors think about leverage and different debt the acquisition is completed. Arbitrageurs “When the company was acquired and ratios,” Haws says. “It’s a cash-flow-driven will speculate on the likelihood of the went private, my role changed,” Kramer world. When you have bonds, it’s a dif- acquisition being successful. You need to says. “I was fortunate that management ferent structure than having only equity. be adept and responsive and nimble to deal thought enough of me to find a position Debt investors look at the company differ- with that change.” where I could add value. That may not be ently than an equity investor might.” Be ready with Plan B, C, or even D. the case for all IR professionals, regardless Even as Interactive Data was going through its of how talented they are. While I’m still Tips to Consider strategic review, Kramer understood that that the point person for all of our investor Other steps suggested by IROs include: there was a chance that it would not result communication, my role has broadened Network with NIRI members to dis- in an acquisition. In addition, the volatile to include regulatory affairs, competitive cover best practices. “In addition to equity nature of the capital and financial markets can intelligence, partnerships and alliances, issuers, there are many NIRI members with a add further complexity in terms of securing and industry research relations. It’s a significant debt-holder constituency,” Kramer adequate financing for a go-private transac- much broader arena.” says. He suggests tapping into their knowl- tion. “As you go through the process, realize Kramer, whose tenure as a NIRI board edge for ideas on how to proceed. it’s not a done deal until it’s a done deal,” he member just ended, adds that the scope of IR Mehok agrees. In fact, the first thing he did cautions. “Put contingency plans in place.” enables individuals to acquire knowledge and when he realized Dell was on the path of going Expect your company to encounter competencies beyond their specific domain to private was to reach out to about two dozen shareholder litigation. When it comes to truly understand what the company is about. peers who had gone through similar processes. buyouts, Kramer believes shareholder law- “When you get to that point, you are able to “A few of the people I talked to said they ini- suits are par for the course. “Your company contribute in a variety of ways.” tially cut significantly out of IR, and it ended will likely be sued by a plaintiff who says When Dell went private, Mehok’s IR up being a mistake,” he says. “They came to the valuation was too low,” he says. team assumed responsibility for servicing the realization that servicing the debt commu- Examine your long-term career debt constituents, partnering with commu- nity is more complex than they imagined.” potential. Should you stick around or start nication, and developing competitive intel- Conduct a self-assessment. Are you shopping your resume? Will you even have ligence. “The relationships we have estab- the type of person who is open to new a job? In the case of Freescale, Haws knew lished with the equity and debt communities challenges? If so, venturing into the private that the company planned to go public allow us to have a good understanding of world might be a good fit for you. “You again, which helped him in making his deci- how those parties are perceiving the compet- may be taken out of your comfort zone,” sion to stay put. “You need to understand itive marketplace and give us insights that a Kramer warns. “You will get exposure to your company’s life cycle and what’s most lot of others don’t have,” he says. “We focus different types of events. I’ve been doing likely to happen,” he says. on taking in that information and distilling it investor relations on the equity side for “You have to ask yourself, ‘Is it worth me down to key actionable analysis.” 15-plus years. In the three years we have not being involved in the public market Because of his company’s corporate cul- been private, we’ve done two refinancings awhile? Can I keep my skills relevant and ture, Mehok finds his new tasks refreshing, of the existing debt and funded a dividend stay abreast of what’s happening in IR?’ rather than intimidating. “One of the ben- by completing a $350 million debt offering. What intrigued me was the idea of going efits of working with Dell is the challenges Now I have a broader base of experience.” public a second time. I told myself, ‘Even if always change,” he says. “It’s not a situation Understand that your shareholder it takes some time, it will be a fascinating where you’re sitting at your desk and doing base will start fluctuating immediately. journey going full circle.’ ” IRU the same thing for 10 years. In my 17 years “When your company is being acquired, with Dell, I’ve had 11 different roles. I’ve whether by another public company or a Margo Vanover Porter is a freelance writer based been in IR almost three years.” financial interest, your shareholder base in Locust Grove, Virginia; [email protected].

12 MAY 2014 IR update IR update MAY 2014 13 STOCKS FOR SALE! IROs are typically not salespeople. Yet there are reasons to consider incorporating a sales approach into investor relations.

By Sallie Hyman

president, investor relations and communi- ARE YOU A SALESPERSON? cations, at Zep Inc. While De Laria believes Most investor relations officers would IROs are typically trained in communica- honesty, integrity and transparency are the probably answer “no” to that question. tion and finance and usually have little or cornerstones of any world-class IR program, After all, the profession of investor rela- no sales training. But understanding and he once believed that IR was more about tions as defined by the NIRI Board of using some proven sales techniques can be marketing but now decidedly believes that Directors says nothing about sales. It reads: an important arrow in the quiver of effec- utilizing a variety of sales techniques can “Investor relations is a strategic manage- tive IROs. After all, effective selling is based help investors match their needs to your ment responsibility that integrates finance, on establishing strong relationships – a core company’s strategy more decisively. communication, marketing, and securities law function of IROs. “Many IR practitioners are marketers of compliance to enable the most effective two- their story,” says De Laria. “While they way communication between a company, the Promoting Sales may know their company well, utilizing financial community, and other constituen- One of the biggest proponents of using marketing techniques is dramatically dif- cies, which ultimately contributes to a com- sales techniques as a key component of ferent than engaging investors as part of pany’s securities achieving fair valuation.” your IR approach is Don De Laria, vice a methodical sales process. IROs should

14 MAY 2014 IR update be spending time to learn about investors able to recognize unrecognized needs of means collecting data on them and incorpo- and helping them understand how their investors and to match needs where no rating it into a database. investment style might be a fit with the needs were initially seen. Maili Bergman, senior vice president, company’s strategy.” investor relations at Live Nation Entertainment Deborah Pawlowski, president and CEO, It’s About Relationships in Beverly Hills, California, agrees. Having Kei Advisors LLC, has been in IR for over 20 De Laria believes that as an IR profes- come from a background of financial years and recalls that sales has always been sional you need to be a salesperson and marketing that had a substantial database part of the job. “In the beginning we had to in being such, it will change the way you on clients, Bergman felt at a disadvantage be very careful never to use the word ‘sales,’ conduct a meeting. De Laria likes to use in her first IR position without one. because we are not registered to sell,” she question-based selling tactics to frame his She recommends keeping detailed notes says. “But we are using a sales approach – meetings and interactions with investors. on investor interaction. “Building relation- providing information to someone to make One of the best ways to start out using ships with the Street requires getting to a decision regarding what they should do.” your questions is to get to know your inves- know individuals personally and profes- Just like salespeople in other industries, tors. “You need to get to know someone to sionally. The only way to keep track of Pawlowski sees part of the IR role as being be able to sell to them,” says De Laria. This the multitude of these interactions is to

IR update MAY 2014 15 take notes,” says Bergman. “The goal is to willing to communicate difficult issues with Laria once did at the end of a first-time have continuity in the conversation as the the IRO that they may not be comfortable meeting (and got the investor to buy). De relationship develops to better understand or willing to share with the C-suite execu- Laria is not content to sit back and let the your ‘customer.’” tives. This knowledge can be invaluable to investment managers contemplate a buy. De Laria also keeps a database. He sug- IROs. It allows them to communicate to He operates by the philosophy, “Always gests spending the first 25 percent of a management what the Street cares about. Be Closing.” Closing the sale, that is. meeting learning about the investor. “People They are able to uncover hot-button issues Investment managers need to buy stocks like to talk about themselves and you will and be able to address them and prepare and they need to beat an average. De Laria quickly learn their investing styles and how their executives before they walk into a believes it is IROs’ responsibility to make they manage their portfolios from these con- room full of investors and analysts. sure that their company meets the inves- versations,” says De Laria. You might learn tor’s needs after the sale is closed. that you are not a good fit with an investor Sales Skills: Rejecting Ask more questions and make fewer in those first 15 minutes as well. Rejection statements. Questions are much harder to Pawlowski sees this time as a way to Rejection is the biggest risk in sales. mismatch than statements because they understand her audience to see if what Pawlowski believes that IROs need to keep invite people to contribute to the conversa- her companies have to offer fits with an in mind that it is not a personal rejec- tion. This reduces your risk by helping to investor. Once you have asked questions of tion, though. It usually means that the expand your dialogue with the client. your investors and have it in a database, the offering doesn’t fit. However, knowing that Next, build your credibility. Prospects will information is there at your fingertips when the greatest risk in sales is rejection, the naturally be cautious with IROs they don’t you do follow-up calls and visits. question-based selling strategy starts the know. As you build your credibility with Bergman does caution that there are conversation between seller (IRO) and buyer them, you will reduce their need to resist. those IR professionals who have concerns (investor) through a series of questions De Laria points out that investors buy from about taking notes and keeping a database. designed to mitigate that risk of rejection. people they know and like. “Some IROs have expressed a concern that Start by using the “Single Ping” theory ­ Building credibility and establishing a notes could be subpoenaed,” she says. ­– send­­­ out feelers and wait to see what relationship will enhance your position to Bergman and Pawlowski both say that they kind of response you get. This can mean sell. Pawlowski agrees that this relationship are comfortable with what information they asking a simple question such as, “When is critical. “Thirty to 40 percent of why are taking down and would not worry if it is a good time to reach you?” or “Can I investors choose your company is the intan- were ever subpoenaed. Bergman explains, ask you a question?” This will give you an gible human factor. It helps to reduce the “We are learning about the investors’ prefer- idea if there is merit in trying to pursue sense of risk to them,” she says. ences, such as what sectors they are active the relationship. Finally, question-based selling uses a in and what they consider to be their invest- Rejection is not the only risk that conversational layering that builds rela- ment style. All compliant with Reg FD.” salespeople face during the sales process. tionships that result in closing deals. This Even though there may be some con- Mismatching ­– the tendency of people to involves creating the relationship through troversy over taking notes and keeping a automatically contradict what someone says slowly channeling questions from a broad database, how you learn this information – is another barrier to success. focus to a narrow one based on knowing – by asking questions, by getting to know Starting the conversation with, “Is this what each investor needs, what you can the investors and analysts, and building a bad time to catch you?” is more likely to present to them in terms of solutions, and relationships – ­is the payoff of being a good get you talking with that person. This is a showing a commitment to the relationship. salesperson. The relationships are what technique known as “reversing the posi- Once it comes times to really focus the help to drive sales and give one IRO an tive.” By framing the question negatively, deal, De Laria is adamant: “If you can’t sit advantage over another. you put mismatchers in the position of in front of the decision maker, don’t waste The relationships also help an IRO to responding in a positive manner. your time. A decision maker can amend the maximize and manage the effective use of Maybe as you are leaving your meeting ‘rules’ if you are a good fit but not exactly a executive time. By having built such strong you ask, “Is there any reason not to call fit with their investing rules.” relationships, investors are often more your trader to start investing?” as De And that is how you close a deal.

16 MAY 2014 IR update Develop Seven Sales Habits 3. Take notes. This relates back to what you say in an answer is in the public Question-based selling is not the only what De Laria and Pawlowski suggest. It domain. By really knowing your stuff, you sales strategy in use in the IR world. is critical to know your clients, and the will know what is safe to say. Bergman likes to use the Seven Habits of only way to remember the likes, dislikes, 6. Welcome complaints. Having relation- Successful Salespeople. These seven habits, and styles of various investors is to take ships with investors makes them willing to much like question-based selling, help build notes and maintain a database. “There is open up to IROs. “This is where, if you look strong relationships. power in getting to know the client,” says from the right perspective, you can be even 1. Make a good first impression. IR Bergman. She says it is also important to more valuable to the C-suite. They [investors] people are often the first point of human take notes on your C-suite so you know may be more willing to voice complaints to contact with a company. They represent what matters to them. you, because they are not willing to criticize the company to investors and media and 4. Keep your commitments. Return the C-suite,” says Bergman. how they dress and present themselves calls within 24 hours. Answer questions 7. Never give up. No need to say more. is very important. Beyond the visual first honestly. Sometimes that means saying you IROs need to be the most knowledge- impression, it is also important to be don’t know the answer, but that you will able person in the company so they can accessible, such as returning messages find it and get back to them. Keeping com- manage the credibility of the organization within 24 hours. mitments helps protect your reputation and and management team. This leaves them 2. Have a positive attitude. Research that of your organization. wearing many hats as they present finan- shows that people can tell if we are smiling 5. Know your stuff. Bergman, De Laria, cials and communicate to and between or not when we answer the phone because and Pawlowski see this point as essential. the C-suite and investors. Proponents a smile affects the tone of our voice. So You need to know your company inside believe that incorporating a sales approach smile when talking to clients. Bergman and out, including the products, services, in the IR role can help professionals build knows that investors might read into your and people, especially the C-suite. “Really better relationships, find the right fits, and attitude that something is wrong with your know your stuff,” says Bergman. “All it takes close the deals. IRU company, jumping to a wrong conclusion, is one time of uncertainty to be perceived even if your bad attitude was due to traffic as not in sync with the C-suite and inves- Sallie Hyman is a consultant with Association that morning. “Our attitude is in our con- tors won’t want to talk to you.” A particular Vision, the company that produces IR Update; trol and very impactful,” she says. challenge for IROs is making sure that [email protected].

IR update MAY 2014 17 NIRI WEBINAR REPORT

Activist Storms How to prepare for and weather activist turbulence. By Tammy K. Dang

e’re seeing a lot more activist they think they may be able to close the it is cheaper than going through the proxy campaigns,” said Derek Cole, gap,” said Grubaugh. voting process. “W president of Investor Relations These types of investors make up a small “These have always been persuasion Advisory Solutions, in a recent NIRI webinar. minority of shareholders, according to campaigns,” Kissane said. “Today’s activists “There are a greater number of activists and Activist Insight, a global information source aren’t viewed with as jaundiced an eye as people becoming more involved in this type on activist investments. They own an esti- many were in the past.” of investment strategy.” mated 1 percent of equities in the United Companies with years of underperfor- Cole moderated a February 2014 States, but target every industry. mance used to be targets. Ones with great NIRI-sponsored two-part webinar series According to Grubaugh, activism has performance can show up on the radar now. -- “Activists Part I: Your Company is the become an asset class attracting new money Target” and “Activists Part II: Managing the because of the investment performance and Preparing for Activists Activists.” Richard Grubaugh, senior vice the success rates of activists. In 2013, activ- In his career, Turcotte has had two president at D.F. King & Co., a proxy solic- ists won typically at a 60 percent rate during encounters with activists. He said the key itation firm, and Cynthia Skoglund, senior a proxy fight. “That doesn’t include all of the is to act before you have an activist in your manager of corporate business develop- settlements that took place way before it went stock. Communicate your story early. ment and alliance management at Beckman to a full-fledged proxy battle,” he said. “Address any elephants in the room that Coulter, participated in the first webinar. According to the Shareholder-Director could make your company vulnerable to Brian Turcotte, vice president of investor Exchange, a group of directors and long- an activist,” he advised. Problematic issues relations at The Servicemaster Co., and term shareholders of publicly traded include your share price underperforming Mary Beth Kissane, communication consul- companies, these funds have amassed an relative to your peers, sector, and the tant, participated in the second webinar. estimated $100 billion war chest. Some broader market; significant management “There are analysts at dozens and dozens plain hedge funds are creating activist funds turnover and controversy surrounding the of activist hedge funds that are screening because they are going to get money thrown board of directors; recent financial restate- every company, looking for any type of at it. Some are going to the media because ments; abundance of cash on the balance value disconnect that, using their strategy, more attention will garner more money and sheet with no well-articulated message to

18 MAY 2014 IR update NIRI WEBINAR REPORT enhance shareholder value; and any attrac- “So no matter what, an activist holder votes and their con- tive monetizable assets that may not appear investor is going to bring in, and use fidence when dealing with to be strategic. an activist.” With the economy recovering, activists against you, all of your corporate Make sure you define and are seeking more financial engineering, governance sins.” enunciate quickly your core share buybacks, increased dividends, and messages and positioning. ­­— Richard Grubaugh, senior vice president, operational-type contests where a number of Maintain a stance of busi- D.F. King & Co. activist investors pride themselves in rolling ness as usual. Keep your up their sleeves and changing business lines. shareholders close and com- “If your company is experiencing any “Every IRO should have the top 50 municate because the activists will be com- kind of issues – product delay, crisis man- activist investor profiles on [his or her] desk municating with them as well. agement situation, anything that makes and ready,” Grubaugh said. Some of the The lead director or CEO will respond if your company have a weak spot –­­ they may most aggressive activists are very respectful you get a letter or call. “It’s critically impor- start looking at you as an attractive asset of the process. Carl Icahn may tweet, but tant, as the IRO, that you have a seat at the position,” Skoglund said. Not all activists there are other activist hedge funds that table,” Turcotte said. “No one knows your are bad and they are very smart individuals. try to work with management, call first to shareholders better than you do, so make “All of these themes wrap themselves in arrange a meeting, and make no demands sure you’re sitting there with your advisors, the cloak of good corporate governance,” to meet the CEO. your board, and your management team Grubaugh said. “So no matter what, an while talking about strategies for dealing activist investor is going to bring in, and Fighting the Activists with an activist.” Be ready with filings and use against you, all of your corporate Act quickly when activists arrive at your press releases because it can spiral out of governance sins.” He recommended that doorstep, advised Turcotte. Engage them control quickly. companies understand how they are viewed early to understand their goals and com- “If you’ve got good relationships with through the corporate governance lens. municate that information to your board. your shareholders, know what they think, Everyone should understand what their Assemble a strong team that will include and can communicate that effectively inter- takeover defenses are, where ISS and Glass PR, IR firms, a proxy solicitor, legal team, nally, you’ve got a leg up,” Kissane said. Lewis are positioned on issues such as com- and investment bankers well-versed in these “One clear way to lose favor with your pensation and pay-for-performance, among a types of activities. Keep the board informed. broader investor base is to tell an activist myriad of other issues. Otherwise, companies During Turcotte’s second encounter that you just refuse to entertain [his or her] risk possibly losing institutional support in with an activist, the company found out thoughts and questions, and that you won’t the event of an activist campaign. Institutional about it when the head of public rela- provide access.” investors have limited bandwidth so they’re tions received a phone call at 8 p.m. on IROs should keep the big-picture going to rely on proxy advisors and media a Sunday night from a Wall Street Journal perspective and help their management team sound bites, the panelists said. reporter letting him know that they were do the same. All your current and potential Turcotte recommended building good publishing a story about the activist shareholders, regardless of their opinions, will working relationships with the sell side and launching a campaign. It was an odd way certainly pay attention to how you and the shareholders, including the governance to find out. The company never received company treat and interact with the activist. teams at index funds because they have a lot the e-mail that the activist claimed had “Know your company, know its weak- of votes when it comes to proxy time. “They been sent on the previous Friday about nesses,” Skoglund said. “You are the asset can really be an ally to you if they believe the campaign. The activists Turcotte dealt to your management team in the eyes of an in your story, your management team, and with had previously gone through the pro- activist campaign.” your governance practices because they typi- cess 90 times. For more information about future webi- cally have a longer term view than an activist Take the high road and focus on the nars, please visit www.niri.org/webinars. would,” he said. The sell side will often company’s strengths in these situations, know if an activist is snooping around in observed Turcotte, who urged: “Don’t get Tammy K. Dang is manager, professional develop- your stock coming to attack you. into the mud. The goal is to win share- ment, NIRI; [email protected].

IR update MAY 2014 19 NIRI NOW

Respect our Quick Takes Community at The NIRI Annual What’s your best advice on preparing and delivering Conference road-show presentations? The NIRI Annual Conference is focused on thought leadership. Only Marj Charlier exhibiting companies may engage President attendees in the exhibit area. Attend- Sunacumen IR ees have been asked not to accept invitations to events from service “Recently, we discontinued carrying paper copies on non-deal road providers not sponsoring or exhibiting shows. I carry a stash of thumb drives with our company logo on trips, and if an investor at the conference. Service and product wants a copy of the presentation after our meeting, I load a copy of the presentation on solicitation is not appropriate by those one. They like the freebie, and it both saves paper and lightens my briefcase.” not sponsoring or exhibiting. For a list of sponsoring and exhibiting compa- Elizabeth R. Allen, CFA nies at the Annual Conference, please Manager visit www.niri.org/conference. FedEx Corporation

“Get your own show on the road! You should travel without senior man- agement – lots of investors will meet with investor relations people without management.” Professional Development Calendar Muriel S. Lange Principal Member May 2014 Lange Ventures, LLC 6 Investors Part I: Sell-Side Coverage webinar “Establish multiple relationships with the managers behind the busi- 20 Investors Part II: Targeting nesses so you get access to the changes that investors want to know about. This keeps your the Buy Side webinar data fresh – also include the working managers interested in the investor relations part of the business. We always have new developments to share. June 2014 7 Finance 101 seminar, Las Vegas, NV 7 Managing Shareholder Activ- IR Research at a Glance ism seminar, Las Vegas, NV 8-11 2014 NIRI Annual Gender of Investor Relations Officers 1999-2012 Conference, Las Vegas, NV

60% 17 IR Plan & Budgeting webinar 23-25 Finance Essentials Inten- 55% Male sive seminar, New York, NY Female 26 Managing the Earnings 50% Process seminar, New York, NY Source: NIRI-Korn/Ferry International Corporate 45% IRO Profession and July 2014 Compensation Survey 8 2014 Proxy Season: Lessons (various years). Compiled Learned webinar 40% 1999 2001 2003 2005 2007 2008 2010 2012 by NIRI, September, 2012.

20 MAY 2014 IR update It’s like spell-check for numbers.

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—Sanjiv Shah, Rand Logistics IR update MAY 2014 21 SPOTLIGHT ON CHAPTERS

Mastering IRO Skills for Career Advancement The NIRI San Francisco chapter hosted a panel of experts to discuss leveraging skill sets to enhance career opportunities. By Brad Mills

very day as an investor relations The IRO Skill Set or abilities. Grow by insisting on getting professional, you are required to Transitional skills (also known as cross- exposure to skill sets that are not familiar to Edemonstrate a comprehensive over skills) are those skills you can utilize you. If you do not have a background in a knowledge of finance, communication, no matter what specific career path you certain area, explain to your boss that you marketing, sales, project management, and follow. Traditionally, these “soft skills” want to be closely involved in that area for a many other skills. include interpersonal, organizational, lead- period of time to gain that knowledge. These skills can also be applied to move Communication: As an up the ladder at your own company or IRO, you must be able to another organization, or even to move into The skills that come from synthesize your business another career field. Knowing how to recog- experience on the job and the into succinct sound bites. nize and market critical skills can make the subtleties that aren’t found in Concise communication difference for your next career move. shows the ability to analyze NIRI San Francisco recently hosted a the numbers are invaluable. and integrate information, panel discussion, “Leverage Your Investor shows self-discipline, and is Relations Skill Set to Enhance Career clear and unambiguous. This Opportunities” to offer insights into career ership, and communication skills – all inte- is an immensely important communication development. Panelists included: gral parts of an IRO’s job description. and marketing skill – leverage it. • Mike Canady, senior vice president, The panelists offered several insights into financial planning and analysis, at Charles key characteristics of successful IROs: Moving Up or On Schwab, whose 22-year career at the finan- Enthusiasm: Have a passion for your These traits can carry over into other cial services company includes previous work. If you can’t be passionate about the positions within the company, a move to a roles as vice president, investor relations, work itself, be passionate about the reason new one, or even into a new career. The key and chief of staff. you do it. is to identify and market these skills. • Karen Quint, executive recruiter in Authentic voice: You know the com- In today’s competitive job world, the financial services practice at Spencer pany as well as anyone. Your insight and employers want to know if you can “get Stuart, specializing in senior financial informed opinion will help your CEO, the job done.” The skills that come from executive searches for CFOs, corporate CFO, and board better understand what experience on the job and the subtleties that controllers, investor relations officers, and is and is not working within the enterprise aren’t found in the numbers are invaluable. other positions. and will help you get recognized as a key They can be the difference between hires. • Paul Warburg, CFO for Contour, who member of the team. Whether you are moving up into the C-suite moved from a position as an IRO at a small- Dedication: Work hard and show a or onto another career path, the skills in cap firm to an IRO at a mid-cap firm, to a willingness to get the job done well. In this which IROs are in solid command will serve position as CFO, and later, president of a business and others, effort often trumps them well wherever they may land. private company. experience because at this level everyone is • David Havlek, former vice president expected to have talent. Brad Mills is CEO of Valuation Metrics and of investor relations and current senior vice Personal development: Don’t be satis- director of the NIRI San Francisco chapter; brad@ president of finance, Salesforce.com. fied with holes in your knowledge, skills, valuationmetricsinc.com.

22 MAY 2014 IR update 35%

Percent of M&A activity considered value destructive by the global buy-side.

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