A lightning response
Debbie Mitchell of Dix & Eaton
Sometimes, consultancies are hired to help with a routine transaction and then find themselves embroiled in a crisis. When the right action is taken quickly, however, a company’s ability to execute its strategy isn’t ruined.
In spring this year Cleveland-based IR consultancy Dix & Eaton worked with Columbus-based Retail Ventures while the company prepared to spin off its Designer Shoe Warehouse (DSW). Just as IPO preparations got under way, DSW found itself dealing with a major data theft issue involving hackers accessing the firm’s database and retrieving customer information, including more than 1 mn credit card numbers.
‘Through a series of processes, DSW immediately alerted the public and its customers and continued to update critical constituencies on the status of the security issue,’ says Debbie Mitchell, managing director of Dix & Eaton.
By taking action quickly, the company was able to execute a successful IPO during a difficult period. ‘We were ready to do an IPO but the first concern had to be protecting DSW’s customers,’ observes Mitchell.
Stepping in
Kathy Waller of the Financial Relations Board
California-based IntraLase, a laser vision company, went public in November 2004 and faced one of its biggest IR challenges in the first quarter of this year. In the middle of a new product launch, Frank Jepson, IntraLase’s former vice president of corporate communications, unexpectedly passed away. While trying to close the first quarter books, Shelley Thunen, the company’s CFO, hired the Financial Relations Board (FRB) to step in and help.
‘Our specific challenge was jumping into a situation during a lot of exciting developments and meeting specific deadlines,’ says Kathy Waller, executive vice president of FRB. ‘We needed to ensure the IntraLase story was showcased in the best possible fashion without missing a beat.’
FRB coordinated IntraLase’s role in the industry’s biggest trade show, communicated its first quarter earnings and picked up the pieces of its annual report. ‘[Jepson] had selected a design firm already,’ says Thunen. ‘No-one knew where that was in the process so we came in and worked with the design firm to get the report done on time and on budget.’
Battle ready
Judith Wilkinson of Joele Frank Wilkinson Brimmer Katcher
Last year, New York-based investor relations company Joele Frank Wilkinson Brimmer Katcher represented Mony in the Mony-Axa merger deal. The firm was brought in because three dissident shareholders – representing about 12 percent of shares outstanding – opposed the merger.
Judith Wilkinson, a partner at Joele Frank Wilkinson Brimmer Katcher, stresses the importance of a quick response to the arguments dissidents raise. It’s crucial for IR to reinforce its message and reassure shareholders that the company is doing what is smart, she points out.
‘Shareholders need to be assured of a fair process and a fair price in addition to confidence from analysts and other third parties who are more credible on the valuation,’ Wilkinson says. ‘Firms always need to adjust when there is opposition because they are used to talking to their shareholders but they are not used to having someone take a magnifying glass out and examine every word to see if they can use it against them. In the end, the beauty of a situation like this – unlike a lot of IR situations – is that you win or you lose with the shareholder vote. There is a certain purity and elegance to the final vote.’
Switching lanes
Roger Pondel of PondelWilkinson
Bulletin board-listed companies aren’t usually enticing clients for established IR firms but Los Angeles-based Outdoor Channel Holdings managed to get PondelWilkinson to help in its plan to upgrade to a Nasdaq listing.
‘As a firm we rarely take on bulletin board companies but when quality advisers such as Bear Stearns on the banking side and Paul Hastings on the legal side come knocking at your door talking about a bulletin board company, you have to listen,’ says Roger Pondel, a partner at PondelWilkinson.
PondelWilkinson set up a two-year strategy in collaboration with Outdoor Channel Holdings’ bankers and lawyers. The strategy focused on upgrading and making professional its communications, corporate governance and disclosure. It also included launching an investor relations web site and adding new board members.
The main challenge was attracting long-term institutional investors. ‘We got through based on a combination of the relationships we had with some of these institutions and the way in which we presented the company – the fundamentals were there from the start,’ says Pondel. Outdoor has now been listed on Nasdaq for a year.
Fresh eyes
Andrew Merrill of Edelman
In late 2003, the corporate board and senior management of Texas-based Cornell Companies came under intense attack from Pirate Capital, an activist hedge fund. The fund accused the company of gross mismanagement and poor decision-making, drawing much negative media attention.
IR firm Edelman was brought in by James Hyman, Cornell Companies’ chairman and CEO, in January 2005 when he was hired by the board to turn things around at the juvenile corrections’ builder and manager.
‘Edelman was retained to provide strategic communications counsel in support of Hyman’s turnaround of the company, which included closing facilities and eliminating a number of executive positions,’ says Andrew Merrill, global managing director of financial communications at Edelman.
‘[Edelman gave Cornell] an unbiased appraisal of the positioning of our story in the marketplace and helped us think through the ultimate approach that would inform which path to take,’ comments Hyman. The CEO added a number of directors to Cornell’s board who were supported by Pirate Capital and was able to find resolve with Pirate without going to a proxy battle.
Looking for guidance
Gordon McCoun of Financial Dynamics
The question of how and when to give earnings-per-share guidance is something many IR departments are struggling with at present. Pennsylvania-based Electronics Boutique was experiencing share price volatility when providing quarterly guidance updates. ‘The stock gyrated positively when guidance was beaten and then reacted negatively when earnings didn’t meet the guidance,’ explains Gordon McCoun, IR specialist at New York-based Financial Dynamics, which counts Electronics Boutique among its clients.
Financial Dynamics worked with Electronics Boutique to focus on longer-term performance drivers and produce a more conservative set of metrics so the numbers made sense and were realistic. ‘This meant when we set longer-term guidance parameters and didn’t change them, Electronics Boutique could develop a track record of meeting the expectation – consequently turning a stock that traded volatile but flat over time into one that made a reasonable move,’ McCoun says. ‘A company needs to take ownership of the expectations and not leave it up to the analysts.’
Guidance is at the top of the laundry list of issues clients are coming to Financial Dynamics for, McCoun adds.
Precious metals
Larry Snoddon of Apco
Moscow-based Norilsk Nickel, 50 percent of which is owned by Russian private equity firm Interros, chose communications firm Apco to help with its acquisition of Stillwater Mining in Montana in the fall of 2002.
‘This case was particularly political because Stillwater is a miner of palladium and platinum, which are strategic metals,’ explains Larry Snoddon, vice chairman and managing director of Apco’s New York office. ‘So it was not only the issue of the first Russian acquisition of an NYSE-listed company but also the fact that the acquisition was mining strategic metals.’
Apco started by introducing Norilsk to the American market prior to the acquisition. ‘Norilsk came to the US and met a number of people in Washington from regulators to legislators,’ says Snoddon. ‘One of the questions that arose was, Why are foreign companies coming in and acquiring this company where many of our people are employed? So we worked with unions, opinion leaders, legislators and representatives in Washington and provided community relations as well.’
Apco helped structure the company’s new board and the acquisition went through in June 2003.
Hired to fire
Michael Claes of Burson-Marsteller
Michael Claes, managing director of corporate finance at Burson-Marsteller, tells of a highly sensitive situation his firm recently took on involving a large technology company. The firm, which prefers to remain anonymous, essentially hired Burson-Marsteller to fire its chief executive officer.
‘[The board members] described trying to have a meeting with this CEO, who would be unavailable for weeks if the chairman or one of the board members wanted to meet with him,’ Claes remembers. Shockingly, Claes says this type of scenario is coming up more and more often.
Burson-Marsteller had another client in the financial services area that it worked with for two years on a plan to get rid of its CEO. The main reason the situation dragged on for two years is that the board couldn’t work up the commitment to make a decision, reports Claes.
‘It’s a very strange phenomenon to see how far this has come,’ Claes comments. He feels the public is unaware of the magnitude of the problem because most situations like this are not visible or remain low profile.
