Each year, a handful of companies that believe the market has not fairly valued their stock decide that the time is right to "explore strategic options," often a euphemism for putting the company up for sale. It's obviously a difficult decision, but if the board believes that senior management has taken the company as far as possible as a stand-alone entity, then exploring such options might prove the best and perhaps only way to boost shareholder value.
In recent years, companies as diverse as Wendy's, Foot Locker, Delta Air Lines, and Friendly's have called in their investment bankers and assigned them the task of figuring out a better course to follow.
The board's decision to take a different tack will present a new challenge for the investor relations officer both from the company's investor base and from the media.
In short order, some long-time investors will abandon ship, perhaps benefitting from the initial boost the stock may see if a sale is a likely outcome. With their departure come the "arbs," or arbitrageurs, who generally have no particular interest in either your company or even its sector. They are making a bet that a bid will come along that is significantly higher than the stock's current price. They are obviously focused on the amount of a possible premium, and the timing for the transaction to close. For them, time really is money.
During this hectic and uncertain time, the IR staff is in great demand. The phone won't stop ringing and the questions can test your understanding of Regulation FD. The best way to manage the process is simple: do your best to get as close as possible to senior management to stay on top of the process. The more you know, the better you will be able to offer counsel and handle inquiries.
Establishing a communications team is often the first practical step. Such a team usually includes the CEO, CFO, general counsel, HR, and IR/PR, and a brief daily meeting can be helpful. These meetings allow for each department to report on the latest developments in the process and what can be appropriately disclosed to investors and other key stakeholders.
Developing a set of talking points is also a smart idea, even if these points remain essentially unchanged. The goal is for everyone to stick to these points and not to improvise. Often market rumors will mushroom and the media will demand a comment. If your company's policy is not to comment on rumors, then stick to it.
Quarterly earnings calls can also be a test of wills, as questions related to the sales process will dominate. It's usually best to include an update on the process during the prepared part of the call and make it clear that you won't comment further.
Throughout this process, it is also critical to keep your fellow employees informed. To keep morale high, communicate often and remind them how important they are to the company's success.
And most important: Remember to keep a toothbrush in your desk drawer. All-nighters are unfortunately a likely part of the drill.
Fred Bratman is president of Hyde Park Financial Communications.