Even though a growing number of firms are launching IPOs, IR experts have noticed that relatively few are seeking assistance from outside IR agencies.
Launching an IPO takes a lot of IR work. A brand must be sold, media questions answered, and an image of a successful company carefully shepherded through potential pratfalls and costly embarrassments.
You would think that would mean companies going public would tend to rely on the advice of outside IR experts. But several of those experts say that, in fact, fewer companies are turning to outside help. Indeed, there is one little-noticed aspect to this year's most exalted public foray: Search-engine giant Google is not using an outside IR firm for its IPO.
Most of the evidence of the trend is anecdotal. "I know a number of investment bankers that I've spoken with have indicated that they're getting fewer and fewer requests from the companies they're taking public for outside IR help," says Howard Zar, EVP and IR partner at Porter Novelli.
The main reason for this might be that over the past decade, so much in-house IR expertise has been built up that the outsiders might not be needed. Of course, this poses a problem for IR agencies trolling for work.
Back in the 1990s tech boom, IR firms proliferated as more companies went public. Then came the scandals and widespread investor perception that the IPOs were deliberately misrepresented. Also came regulation. By August 2002, both Regulation Fair Disclosure and the Sarbanes-Oxley Act had become law.
The work of IR firms proved more necessary. They could do the immense lifting behind launching an IPO, wrangling with regulations that companies going from private to public might not be familiar with.
"The company [going public] has been working very hard to go through the due diligence, do the road show, and all of that requires a great amount of management time, energy, and attention," says Gordon McCoun, IR director and senior MD at Financial Dynamics. "They get to the point of being public, and now they've got a very important constituency out there that they've not likely dealt with in the past.
"So, all of a sudden, there is an audience that has a unique point of view about the business, requires a lot of hand holding, and there may not have been time for management to appreciate how that audience interfaces with the company, how all the regulatory constraints are involved with talking with that audience," he continues.
But increasingly, that constituency and conversation became so important that more companies developed internal IR operations and expertise. "Quite frankly, what's happened since the tech boom," Zar says, "is you minted so many new public companies and IR departments that you now have a large body of people out there who actually are experienced in this field, where 10 years ago there weren't that many."
In addition to contending with that, there are also so many IR firms now that the number of new IPOs can't keep up with them. And companies can be more selective, using the IR firm services they want and skipping others. It is, as one investment professional put it, an IPO's market.
Firms can adjust and are adjusting to this tighter IPO market. Despite Google's IR agency-free approach, IR firms still provide services that companies need. But these firms may find more work if they don't expect to be the IR firm for the entire IPO process.
"You can always hire people to do the arms and legs inside cheaper than you can hire an outside firm," Zar says. "But if you've got an outside firm that's got good experience and can provide a good overall view of the company - best practices, quick changes, interesting things they're seeing - that is what I think is most useful for these companies."
Zar says a common occurrence for companies launching their IPOs is that they bring in an IR company too late. For instance, a company waits until it files its registration statement and enters its quiet period - and then wants help with publicity.
"But it's too late," Zar says. "They're in their quiet period. It's like, 'If you had called us two years ago, we could've helped you position your story.'"
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