The once silent owners of listed businesses have finally found a voice. After much chivvying from former City minister Lord Myners and others, institutional investors, who were criticised for not speaking up as the ultimate owners of the companies in which they invest, are now playing big roles in shaping outcomes of takeovers and governance battles.
Take Pfizer’s recent aborted bid for AstraZeneca. When Anne Richards, chief investment officer at Aberdeen Asset Management, went public in support of the British pharmaceuticals group, it was at a critical point in the contest that turned the screws on Pfizer. She said: "The price is finely balanced. It’s a good price that’s on the table at the moment but probably they could do better than that." Given that Aberdeen had expressed scepticism about Pfizer’s proposed deal and its impact on Britain’s science base, it helped cement support for AZ’s board from multiple stakeholder groups at an important time.
The willingness of fund managers to speak at key moments has now become part of the public relations armoury and, deployed at the right time, can help galvanise support from other investors. As M&A and shareholder activism reaches levels not seen since before the financial crisis, more attention has to be paid to scoping the likely involvement of fund managers and it should be considered central to any company’s preparation.
Once the final offer is on the table for a potential takeover target, the City reporters are calling fund managers with a reasonable stake asking what they are going to do and almost every fund manager will respond, many of them on the record. In the 1980s, Prudential owned three per cent of every big stock but never commented. It preferred a private meeting with a chief executive. Today Nigel Wilson, chief executive of Legal & General, which controls four per cent of everything in the FTSE, is not shy of publicly dictating board policy. A few weeks ago he said companies should use surplus cash to invest in the real economy rather than finance share buybacks. Wilson said he had already relayed the message to Britain’s biggest companies.
Fidelity and David Cumming at Standard Life now have regular morning slots on BBC Radio 4 where their proclamations move markets. Neil Woodford, the former star manager at Invesco Perpetual, used PR to shape outcomes and launch his fund. Andy Brough of Schroders and Tim Steer at Artemis are never shy of giving an opinion and started the ball rolling in their The Sunday Times columns nearly a decade ago.
City firms, and other consultancies, have to better understand the relationship between institutional investor and company. That is why KPMG bought Makinson Cowell, the investor relations firm, earlier this year. Understanding what is driving fund managers and their investment criteria – and informing the boardroom – is becoming a valuable commercial tool. It is also becoming a vital communications tool and the influence of investor relations firms will grow on the back of it.
John Waples is senior MD and UK head of strategic comms at FTI Consulting