OK, so now it is that wet Wednesday in Cleveland. The CEO is there. He is prepared. He knows his 4 to 7 things. You have done some preliminary rehearsals. He is going to follow the 4Cs and be Clear, Credible, Consistent and Compliant. His materials look great. Materials aren’t everything, a PowerPoint is not a script, but it looks good. The 4 to 7 things are there for all to see. The CFO is also ready. In the Q&A preparation he was allocated the questions he will be called upon to answer and told which questions the CEO will handle.
Surely we are going to reach our destination without a problem?
So, not quite a guarantee then?
Nothing is guaranteed but there are a few more things that are well worth the effort to improve your chances – preparation and feedback
- When and where? A piece of common sense, but often forgotten.
- You turn up and you weren’t prepared for the niceties of the building parking arrangements or checking in with security. You go to the 8th floor reception but your meeting is on the 10th floor. This kind of thing can be dealt with by arriving 15 minutes early for each meeting in case of complications. On the other hand you can call ahead of time and, for the easy access meetings, the CEO could use those 15 minutes to have a sandwich. She always does better when she’s had a sandwich.
- The meeting room does have projector facilities but there are technical problems. The portfolio manager’s assistant thought you would bring hard copies. You did bring hard copies but you also had that spectacular 60 second piece of video that now won’t play on their system because you can’t figure out how to hook it up. The PM’s assistant is a temp, the regular one is off sick. She calls IT. Now your 45 minute meeting is going to last 25 minutes.
- Who is this person? Some of this information will have been gathered during the charting your course process. You are here after all because this fund has positions in your peers. They must like the space and be fairly knowledgeable right? True but a fund is not a person.
- The person you are meeting works for the person who works for the person who works for the portfolio manager.
- The person you are meeting seems relatively uninterested in your thesis. He is however very interested in what you know about rumors of shipping delays at one of your competitor’s facilities in Asia.
- The person you meet is an expert in following you and your industry. “Look, I’d really rather focus on just three questions that I have if that is OK with you?” Luckily the questions were close to some you had rehearsed. “I wish I had known about those questions earlier,” says the CEO “we would have hooked the head of Europe into the meeting by phone and had him answer the second question directly.”
Clearly, the more you know about who you are meeting ahead of time and what is on their mind, the better and more effective the meeting will be.
- What next? Funds do not typically take a meeting on a non-deal roadshow and rush out at the end of the meeting to place an order for 100,000 shares. However both you and the fund have devoted 45 minutes to a meeting. You each had expectations going in. To what extent have they been met at the end of 45 minutes? It is well worth designing in a 5 minute slot as part of the time you have been given to have this exchange with the investor:
- Has your perception of the Company changed favorably as a result of this meeting? In what way?
- What are your key takeaways about our company as a potential investment for your fund? What are the strongest and weakest parts of our investment thesis?
- What more do you need to know by way of follow up from us?
- Will you add our company to your watch list for possible later investment?
- What is your internal process from here?
- How would you like to be kept informed about our progress?
For your part, if the fund shows interest, then you need to keep in touch with them, provide additional information if they request it, put them on your various distribution lists. Take a look at their holdings each quarter. If they appear to changing their stance in your sector favorably, reach out again and see if they would like an in-person update. If the meeting was arranged by one of your sell-side analysts, either follow up directly with the fund, being respectful of the analyst’s relationship, or get feedback from the analyst directly.
- A honest post-mortem. At the end of a three-day non-deal roadshow, management may have presented their case 15 times. You need to gather all the feedback – the questions asked during the meetings, the feedback at the end and any feedback gathered through post-meeting follow-up either directly or through the bank analysts and salespersons.
“The problem with communication is the illusion that it has been accomplished.”
George Bernard Shaw
Communication can always be improved. Feedback is the best way we know to concentrate efforts where they are most needed. For example we had a client for whom the feedback was “great management team, strong domestic market position”. This was encouraging because these were indeed two of their 4 to 7 things. The problem was nobody said “exciting growth opportunities outside the US,” and as a result, because the US market was saturated, the stock carried a PE that reflected a modest anticipated growth rate. Given that “exciting growth opportunities outside the US,” was also one of the 4 to 7 things, there was a problem. Either the investors weren’t hearing it – could be unclear or inconsistent communication – or they were hearing it but not believing it – lack of credibility. The solution in follow up and future communication opportunities was to increase clarity about the ex-US growth opportunities and add more tangible examples of what the company was doing overseas. Over time the company began receiving credit for that aspect of its investment thesis and investor demand sent the stock higher.