While the robust economy has signaled good news for corporate America, it has also meant a slew of hostile takeovers that require highly responsive investor relations strategies. But ironically, solid IR plans appear to be the missing component during these volatile times and companies are forgetting to bridge the communications gap between boards of directors and shareholders.
For this piece, PR NEWS embarked on both a retrospective and current review of stories that have been the focus of newspaper and magazine articles during the past year. The press apparently loves hostile takeovers because of the fodder they offer to pursue controversy. Nearly 272 print stories dealing with business crises in 1997 dealt with hostile takeovers, a 101 percent jump in that category when compared to 1996, according to the Institute for Crisis Management.
And we interviewed industry insiders to get a sense of what part IR plays when a takeover is likely. But what we found was surprising: in the maze of information we came across, we unearthed very little news about IR tactics, including any mention of bringing in a team which can set up face-to-face meetings with institutional investors. Print coverage touched on everything from how Hugh L. McColl Jr. has built the giant that has become NationsBank, to Chrysler Corp. extending for another decade its poison-pill plan, a defense that can be used during takeovers to make them prohibitively expensive.
"I think IR people have been champing at the bit but upper management has been slow on the uptake," says Andrew Edson, chairman of public and financial relations consultancy Andrew Edson & Associates, Inc. and a senior counselor to Manning, Selvage & Lee. "Senior management generally views the IR team as a complaint department but they need to view them as an intelligence-gathering team" that can prompt dialogue with shareholders.
That can be done through last-minute road shows with CFOs and CEOs to teleconference calls with analysts. Companies can even do something as simple and pragmatic as staging a town-hall meeting and giving shareholders a toll-free number so they can call with any questions or concerns.
"[However] companies have typically communicated with shareholders through ads taken out in The Wall Street Journal, but there is so much more they can do," adds Edson.
"Management often battles [the attempted takeover] behind closed doors with a star chamber kind of mentality," agrees Neil Stewart, North American editor of Investor Relations, a monthly magazine. "But they need to fly the banner of shareholder value."
To do that, the most obvious route is sharing analysis and research with shareholders to delve into why a takeover may not be the best deal. Find out what the takeover mogul has failed do in the past or point out that the new leaders won't have the inside knowledge of how the company built its product or services.
The IR professional must guarantee that the CEO and CFO present a convincing case for rejecting the offer, which can be extremely tough when cash is in the offing. The IR team needs to help upper management strategize a communications - not just a defensive - plan.
Language Vs. Communications
Today, companies are getting caught up in the mish-mash of murky messaging that has grown out of the influence of the arbitrage and proxy solicitor communities. So much of what the media seizes on is insight or perspective provided by these middle- men. And what's left is a gaping information hole that IR isn't filling.
Case in point: the latest publicity round in the high profile fight between Computer Sciences Corp. and Computer Associates International has absolutely nothing to do with how the target company is addressing shareholder perception.
Instead, recent coverage concerns a lawsuit CSC filed against CAI for allegedly offering CSC execs millions of dollars to support a merger offer.
"[And] the target company usually has a bunker mentality which gives way to the predator being able to maneuver better and put his or her spin on the story," says Thor Valdmanis, a USA Today reporter who is based in New York, the IR hot seat of the U.S.
Valdmanis has been with the newspaper's New York bureau since August and has covered some of the most recent hotly contested takeover fights, including this year's Hilton/ITT Corp. showdown. ITT shareholders voted just weeks ago in favor of a $13.6 billion merger with Starwood Hotels and Resorts Worldwide Inc. (Bob Ferris, 212/715-1573; Andrew Edson, 212/213-0904; Neil Stewart, 212/425-9649; Thor Valdmanis, 212/715-2074)