Parlez-vous Investor Relations?
by Carol Lippert Gray

Page 2 of 2

A View from the Opposite Shore
"U.S. investors invest in U.S. stocks. European investors invest in worldwide stocks," says Michael Bamforth, a managing partner at Kuhn Partners, an investor-relations consultancy in Brussels. That's one difference between the two. And it's why many Europeans are feeling burned; Bamforth says they misread the world markets badly for the past five or six years, thinking American stocks overvalued and sinking money into Asia and emerging markets instead. "It's difficult to get into a market you felt was fully valued five years ago and which has gone up 30 percent on average each year since then," he notes.

Still, he says, "The potential for U.S. companies coming to Europe has never been better. The overall investment strategy in Europe is predominantly growth at a reasonable price. They're not momentum players, so they're searching the U.S. market for value plays, looking to increase their weighting." He says this is true especially in Germany, where a new breed of money managers recognizes that equities yield better returns than their fathers' favorite vehicle, bonds.

Furthermore, he says, Germany and France are turning to equities to finance their newly established pension funds. And, he adds, the U.K.'s appetite for U.S. equities is growing in the wake of sub-par performance by some major money managers who undervalued their U.S. portfolios.

"Certain companies need to do IR in Europe because they're widely held here," Bamforth adds, citing technology and pharmaceutical firms in particular. "They need to update their shareholders on their performance and strategy. But, of course, those that aren't widely held should do IR here, as well."

There are, of course, caveats. "Europeans are not homogeneous," he points out. One example: "The predominant source of funds in the U.K. is institutional pension money. The predominant source of funds in Switzerland is private investment money." Stock preferences vary, too, he says; biotechs and smaller-growth stocks, for instance, are more popular in the U.K.

Face Time
But trying to attract investors without first attracting U.S. sell-side research coverage is "like trying to ski without snow," according to Bamforth. Thus, he says, European fund managers - generalists who follow the whole U.S. market rather than specific sectors - "need all the help they can get in terms of which sectors and which companies within those sectors they should be looking at. They look to the U.S. sell-side firms for this help and they also need a direct line to a company's IR department. You should mail and fax information on a regular basis and commit to visiting Europe, say, once a year. And they like to meet senior management. If they can do that on a regular basis, they're more likely to hold the stock."

Orchestrating a European roadshow, though, can be time- and labor-intensive. "You have to target the right cities, spend the right amount of time there and visit the major shareholders one-on-one - although if you just did IR in London, you'd cover 60 percent of the territory anyway," Bamforth advises. "The larger money managers want personalized service, so you need a couple of days in a city. With so many of these in London, you need a couple of days there." The presentation should resemble one a company would make to U.S. shareholders, he adds, although presenters should remember that they're addressing generalists.

"You also have to meet with major non-shareholders for sales calls, then hold a group meeting over lunch to mop up the rest of the prospects," he says. Representatives of Lucent, for example, recently spent two days following this scenario in London, and talked with 110 investors.

Understandably, he says, European analysts focus on market leaders. Therefore, "If you can show you're number one or number two, that's an obvious plus," he says. And how helpful is the Internet? "Web sites are becoming a major tool," Bamforth says, "but the buy side still relies on personal interface."

Carol Lippert Gray is managing editor of Financial Executive.