Having exhausted the day in intense strategy sessions planning their upcoming IPO, Lending Tree executives and communications pros were spent.
Stepping out of underwriter Merrill Lynch's downtown Manhattan digs, the small group piled into a yellow taxi, heading for a midtown steakhouse - so tired they barely spoke to one another.
'Then, out of nowhere, the Lending Tree commercial comes on over the cab's radio,' says Deborah Roth, director of corporate communications.
'Re-energized, we just started yelling and jumping around. I guess we just needed a reminder of what a challenging, rewarding undertaking an IPO can be.'
Lending Tree, an online loan marketplace, had announced its intention to go public months earlier. Its PR pros were submerged in the process - and didn't come up for air for six months.
As with many companies, though, the PR strategizing for Lending Tree's IPO campaign actually stretched back to the firm's launch in 1996. 'From the beginning, an eventual IPO was always an option,' Roth recalls.
Lending Tree may have been successful - its stock shot up to $21 per share, though it has since been trading in the $5-to-$6 range - but it certainly wasn't unique. A growing multitude of old economy companies are either implementing or mulling over long-term IPO communications strategies.
As for new economy start-ups launched during the Internet age, you'd be hard-pressed to find one not banking on an IPO pay-out somewhere along the line.
Start grooming early
In either case, experts agree, it's crucial to start grooming the company's reputation even years before the IPO date. There is much work to be done long before the road show and quiet period.
'I come from the school that says you should act like a public company, even if you're not,' says Steve Frankel, managing director for Burson-Marsteller's corporate/financial practice. 'Not everyone in our business shares this view, but at the end of the day you still have to be accountable to key stakeholders including customers, employees and private investors.'
'Ideally, companies will begin preparing for the public market about two years in advance of an IPO,' echoes Michael Rosenbaum, COO of the Financial Relations Board. 'This gives them time to make changes that become part of the culture, rather than artificial steps related strictly to a public offering. Even if a company doesn't go public, the discipline of acting like a public company is highly beneficial.'
Another reason for establishing a PR program early on, says Howard Zar, SVP and head of Porter Novelli's IR practice, is that a firm can alleviate some of the pressure exerted by industry regulators.
'The SEC looks askance at companies who start their PR outreach efforts in tandem with their filing of an S-1 (the first IPO filing),' says Zar.
'However, companies that have a history of PR prior to their IPO filing are permitted (in practice) to continue such PR during their SEC-mandated quiet period, which often lasts a good four months.'
Which isn't to say that the SEC doesn't take the quiet period very seriously.
And instilling that in executives should be part of the financial PR pro's responsibility.
Last year, the agency delayed the IPO of online grocer Webvan Group.
Apparently, not only had backers discussed the prospects of Webvan during the quiet period, but CEO George Shaheen, a former Andersen Consulting chief, gave an interview to Forbes magazine. However, it wasn't until after Adam Lashinsky, Silicon Valley reporter for TheStreet.com, dialed into a conference call held during the company's road show and published information not in its prospectus that the SEC moved to delay the IPO.
Webvan subsequently revised its prospectus, detailing the new information, including the revenue from each distribution center and its expected losses for 2001.
Lashinsky discussed the events at a conference earlier this year. 'I don't advise any company or publicists to do anything that their lawyer isn't comfortable with,' said Lashinsky. 'But what reporters really hate, and will leave a bad taste in their mouth, is pretending the reporter doesn't exist. The more courteous thing to do (during the quiet period) is ask your lawyer to return the phone call and see if they can't be helpful in some way.'
An IPO is a time-consuming and expensive undertaking. Though most financial relations folks won't discuss figures, many industry sources say it's not uncommon for financial relations fees for a major IPO, including pre- and post-offering services, to run into the high six-figure range. And that's not even counting prospectus printing, road show preparations and other professional fees.
Acclimating key Wall Street analysts and beat reporters to your company, developing an annual report (even though it's not required) and assembling a board of directors, including credible outsiders, are just a handful of tactics private companies are employing early on, says Burson-Marsteller's Frankel.
The communications strategy for an IPO is usually conceived and orchestrated by a company's internal PR machine. Lending Tree's campaign, piloted by Roth, involved extensive media and financial relations - including reputation management and corporate positioning. To augment the in-house expertise, the company contracted Middleberg & Associates to assist in the IPO, and hired media training specialist Colleen Growe, who runs CMG Productions.
Roth explains that outside IR agencies like Middleberg not only bring in IPO communications expertise, but also invaluable contacts in the media and analyst communities.
First and foremost, at the outset of a campaign a company needs to begin fashioning a profile for itself. Ted Pincus, chairman and CEO of The Financial Relations Board, points out that perception has as much to do with IPO pricing as anything else.
Cole Taylor Bank Group approached FRB in the mid-1990s when it first began thinking about an IPO. As it soon learned, building a reputation means more than fielding a few calls from reporters. As part of FRB's plan, Cole Taylor officials not only honed the company's identity and targets, but also underwent extensive media and analyst dialogue training to articulate that information.
Steadily, Cole Taylor began regularly releasing information, everything from press releases to quarterly and annual reports. The bank group also turned to less obvious ways of boosting its profile. FRB encouraged Cole Taylor to identify and adopt a worthy cause it could sponsor, as well as to put some of its expertise on display by offering it for free.
Cole Taylor's campaign worked so well that it had at least one surprising result. 'The day Cole Taylor went public they got a number of calls from confused journalists,' says Pincus. 'They just couldn't believe that Cole Taylor hadn't been a public company all along.'
Establishing your profile, and consistently massaging members of the media and your potential investor pool, is critical - that is, as long as you've properly defined your company and positioned it to realize its brand potential.
'In positioning (e-commerce consultants) Luminant Worldwide, a company that had no brand identity prior to its IPO, Middleberg worked with the company to identify its key differentiators,' says Don Middleberg, chairman and CEO of Middleberg & Associates. 'We found that Luminant's core strengths were depth of expertise in e-business systems and strategy, combined with an understanding of each client's bottom line. Based on our assessment, Luminant Worldwide was firmly positioned as a leading provider of Internet professional services.'
At the same time, it's important that the company's identity is crafted to appeal to diverse audiences.
'The engineers who buy Cisco Systems routers may love their products, but they don't care about the company's growth strategy,' points out Bruce Berman, president of Brody Berman Associates in New York. 'However, Wall Street does.'
It's essential that a company's value be effectively communicated to potential investors. This is where a financial relations pro can have the biggest impact on the outcome of an IPO.
'You are competing for attention with more than 10,000 public companies, not to mention other investments besides equities, such as bonds, gold and commodities,' says Mary Dunbar, SVP at Cleveland PR agency Dix & Eaton.
'Research shows that companies that are more proactive in their communications enjoy higher valuations.'
One of the most important things for a Wall Street-bound company to do is to choose an executive to represent it. That person is usually the CEO; research by Burson-Marsteller reveals that 45% of a company's image is tied to the CEO - a sentiment expressed by most successful financial relations pros.
'One of the best techniques for building brand equity is through a spokesperson,' says Middleberg. 'Your CEO is often a good choice. An aggressive media relations and public speaking program built around the CEO or a senior executive can be an extremelyeffective tool in raising public awareness.'
In the meantime, financial relations pros are also turning to the Internet to get the pre-IPO word out.
'Companies need to establish a strong Internet presence and a company's Web site should become an important center for disseminating financial information, for providing management's vision and to showcase a company's services and products,' says Jim Brown, president of BergerBrown Communications, South Orange, NJ.
Multi-pronged strategies, mushrooming budgets, increasingly sophisticated technology, corporate grooming ... there are just so many facets to an IPO communications program. Some of these are also important to companies seeking to merge or be acquired, which - to a lesser degree - some are.
But staying private is a goal for very few.