M&As, IPOs direct financial agencies to other work

NEW YORK: Bankruptcies and other crisis communications work appear to be sustaining financial PR agencies as the recession has severely impacted both M&A deals and IPOs.

NEW YORK: Bankruptcies and other crisis communications work appear to be sustaining financial PR agencies as the recession has severely impacted both M&A deals and IPOs.

Dealogic data cited by The Wall Street Journal found that only 29 companies went public in 2008, as opposed to 215 in 2007. A second report by Bloomberg found that “mergers, acquisitions, and divestitures plunged 38% to $2.5 trillion from $4.06 trillion last year.”

“If you look at our business, you're seeing a reflection of... the broader market,” said Mark McCall, president of FD in the US. “We're not working on as many M&As as in the past, [but] there's an increase in restructurings and bankruptcies.” (FD recently added a European restructuring practice.)

Other firms also noted the decline in M&As and an uptick in restructuring and bankruptcy work.

“The objective fact is that there's less deal volume,” said Andrew Brimmer, partner at Joele Frank, Wilkinson Brimmer Katcher.

He added that the agency is “seeing a rise in our restructuring work and other forms of crisis communications, which would include things like board changes, earnings shortfalls, [and] bankruptcies.”

Brimmer pointed to clients NRG Energy, which has received a hostile offer from another energy company, Exelon, and Washington Mutual, for which the agency's efforts include bankruptcy services, and said he believed the firm was in a good position.

“The deal work tends to coalesce around the industry leaders,” said Brimmer. “We're in a fortunate position in that sense to still be seeing our fair share of deal flow.”

Kekst & Company senior partner Jeffrey Taufield also said, via e-mail, that the firm is “working on many restructurings and bankruptcies.”

Non-domestic IPOs might be another source of income for the financial firms and practices. Ryan Barr, SVP and director of financial relations at Hill & Knowlton, said that while “there aren't a lot of planned IPOs,” the existing ones tend to be “international-based, coming to the US... particularly out of China” and in “certain industries,” such as video games.

Restructurings and bankruptcies aren't the only avenues from which financial communications pros are soliciting work, though.

“We're getting a lot of new business that's focused on reputation management,” Barr said. “A lot of it is coming from hedge funds, investment advisors, and asset management firms, particularly those that have done well in 2008 that need to separate themselves from those that have struggled either because of risky investment style or even exposure to [Bernard] Madoff.”

He added that the firm's reputation management efforts have been targeting Main Street more often “because of the perception of Wall Street [in] the financial crisis.”

Taufield said Kekst is working on “numerous control contests, litigation support matters, and, of course, guiding clients through a myriad of highly complex disclosure announcements related to the economy.”

Taufield also pointed to the positive benefits of Kekst's relationship with holding company Publicis Groupe, which acquired it this past summer. “We collaborate on business opportunities... and, importantly, we no longer need to concern ourselves with financing issues as we look to the future,” he said.

Claire Koeneman, co-president of MWW Group's Financial Relations Board, said that even for clients whose IPOs are on hold, the proactive work, such as marketing trips and getting audited financials, continues as though “they were public companies.”

“Rather than waiting for the cap-ital markets to turn around, they'll be ready to go and, most important, they'll be top-of-mind with sell-side analysts that they have talked to, investors, bankers, [etc.],” she said. “They've shown they're really serious... [that] they can be really professional when they come out.”

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