Case Study No. 2956: Investor Relations


Proactive Program Puts 'Special Situation' Co. on the IR Map When Diebold, Inc., a leading transaction systems hardware supplier, based in Canton, Ohio, geared up to change its shareholder base and mix seven years ago, it relied on the proactive muscle of a newly formed investor relations and communications team. Changing the way it was perceived by the investor community and financial media was "easier said than done," according to Donald Eagon, Diebold's vice president of corporate communications, who was recruited by the company for this mission. In 1990, the company was disproportionately owned by institutional investors, making it vulnerable to a hostile takeover (a prevailing trend in the late 1980s and early 1990s) and since it attracted minimal analyst coverage, Diebold's stock was extremely undervalued. A snapshot of the company's investor profile back then revealed: its market capitalization was less than $500 million (making it a small-cap company); a total of 115 institutional investors held 82 percent of the 13 million shares outstanding (at a time when such ownership for the top 1,000 U.S. companies averaged 50 percent); and to further add to its unprofitable shareholder mix, the top 10 institutional investors held more than 50 percent of the shares outstanding. To turn its disproportionate investor mix around, Diebold enlisted the PR expertise of Cleveland-based Dix & Eaton, which launched a multi-year investor relations/corporate communications campaign that relied on an aggressive schedule of targeted meetings and extensive collateral support. Today, its shareholder base mix boasts a 65/35 institutional/individual mix, and has more than 250 institutional investors with the top 10 owning 30 percent (down 20 percent). In recent analyst reports, Diebold has garnered a technology status with stock that has begun to perform similarly to other technology companies, boosting its p/e multiple to the high 20s. But the program's biggest tell-all is in its market value growth from $463 million in 1990 to $2.7 billion in 1996, earning Dix & Eaton a Silver Anvil Award this year from the Public Relations Society of America. Retail Plan Bucks Investor Trends Eagon established a five-year strategic plan with an eye on achieving two major objectives within the first three years: pulling together a first-ever investor relations/communications team from scattered divisions in the company and putting the company on an aggressive growth plan through self-supporting stock. "It was the year [1990] from hell," admits Eagan, but having a newly formed management team with progressive CEO Robert Mahoney at the helm, made those goals achievable. During the audit phase, the Dix & Eaton team set out to buck trends by courting increased retail ownership, pumping up its average daily trading volume, boosting Diebold's price-to-earnings (P/E) multiple and attracting favorable ink from the trade and financial press with an annual campaign budget of about $500,000. Led by Mary Dunbar, senior VP of financial communications, the team consisted of staffers from three primary areas: investor relations (two), media relations (two), and editorial services (one). The program's immediate goals were to achieve a 70/30 institutional/retail investor mix and broaden the institutional shareholder base. Maneuvering around Diebold's "special situation" status made designing a strategic retail investor relations program especially challenging. That special situation meant that the company was not easily defined by analysts into a recognized industry category and thus "fell through the cracks," according to Dunbar. To combat its undefined status, the investor relations/communications program concentrated on developing key messages about the company's growth strategies, and encouraging analysts to find an industry fit for Diebold. The campaign's impetus was its aggressive investor meeting schedule. Diebold established an active participation in the National Association of Investors Corporation (NAIC) programs, maintaining a schedule of more than a dozen meetings a year, and met with numerous retail stockbrokers. At the same time, the company also met with a broader range of institutional shareholders to loosen the grip of the top 10 (institutional investors) who commanded half ownership. This brutal meeting schedule earned Diebold access to thousands of investors who needed face-to-face assurance of the company's expanded vision, according to Eagan. "I'm a firm believer in looking into the whites of their eyes to build an individual [investor] base for this company." Making available as much information as possible was also a selling point. Collateral materials went above and beyond what most investor relations/communications provide, according to Dunbar. The full range of support included a data book for professional investors, a fact sheet for stockbrokers, NAIC green sheets and low-cost investment brochures, an annual report and corporate profile. The agency also plugged away at internal communications by writing speeches, articles for the company newsletter, initiating conference calls to investors, conducting research and generating PR hits in the financial media: Barron's, Fortune, Forbes, Wall Street Journal, CNN, and CNBC, as well as the trade media: American Banker and CFO. (Dix & Eaton, 216/241-0405; Diebold, 330/490-3770)

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