STRATEGIC ROLE: City PR consultants are being drawn into financial
planning and decision making at board level
INVESTOR RELATIONS: Public relations agencies are making inroads into an
area dominated by other advisers
FINANCIAL REPORTS: Top companies in major European countries are
adopting Anglo-Saxon standards
UK City PR advisers have become an integral part of decision making at
the top of Europe’s most profitable companies. Rob Gray uncovers the
secret of their success
Last year the City saw a boom in domestic mergers and acquisitions
activity and a steady rise in the number of companies coming to the
According to Department of Trade and Industry figures, during 1995 UK
companies were involved in 122 deals worth a cool pounds 32 billion
combined. Pharmaceutical company Glaxo led the way with its pounds 9
billion takeover of Wellcome. But as Granada’s successful bid for Forte
illustrates, 1996 could well be as promising a year for M&As as 1995.
And high-profile flotations, such as Hutchison Telecom’s Orange, have
already created a buzz in the market.
The intense excitement of large flotations and the high stakes outcomes
of M&A work capture the headlines - and the high-margin fees paid to
advisers, including financial PRs, also turn heads. Yet in truth,
despite their high profile, flotations, bid promotion and defence
activity form only a small part of the City PR landscape. Citigate
reckons that M&A activity accounts for only 30 per cent of its fee
income, while Financial Dynamics and College Hill estimates put M&A fees
nearer to a quarter of fee income.
On a day-to-day basis, financial PR more usually involves helping client
companies communicate with the people that own them. The conduits for
this communication are primarily the media and City analysts. Although
this is clearly a year-round process, activity is stepped up twice a
year when a company announces its interim and end of year results.
‘The prosaic necessity of getting a proper understanding of a company’s
full-year and half-year figures is the most important part of any
financial PR strategy,’ says Lowe Bell Financial managing director
Due to the Stock Exchange’s strict rules on the disclosure of price-
sensitive information, which stipulate that as far as possible
information should be released to shareholders equally and at the same
time, financial PRs need to tread carefully. In this context, set-piece
events such as corporate AGMs, public announcements and analysts’
briefings are patently of prime importance.
With analysts, whose research and views have a direct bearing on the way
companies and their sectors as a whole are perceived in the market,
there is little room for error. And while it is the client and its
broker which handle the bulk of the preparation and execution of a
presentation, financial PR agencies often have a role to play in the
process by, for example, canvassing the analysts beforehand.
‘Such presentations cannot be given in a vacuum and are prepared in
response to feedback on what are the analysts’ major concerns and areas
of interest,’ adds Collis.
Fund managers and other institutional investors draw heavily on the
opinions of analysts when making investment decisions. But, of course,
they are also influenced by what they see in the media.
Positive media coverage is essential for a quoted company if its share
price is not to be undermined. This can put a lot of pressure on
‘Our trade is at the sharp end,’ says College Hill chairman Alex
Sandberg. ‘We will be beaten up by the client if he doesn’t read a
glowing article about his company - whatever the financial results
But, as Ludgate Communications chairman Tim Trotter points out, there is
now a good deal more to City public relations than media relations and
the odd chat with an analyst. ‘The nature of advice required has
changed,’ he says. ‘A lot of companies are using leading consultancies
more for strategic advice rather than just for execution.’
The leading financial consultancies are now, in PR terms at least,
mature businesses. The opinions of their senior practitioners have a lot
of credibility and are often eagerly sought by the directors of
companies planning a flotation or share offer. In other words, PR has
earned its place next to the brokers and investment bankers at the City
Financial PR advisers are also able to act as a buffer between clients
and analysts, reporting back the views of the latter on the former.
Sometimes this entails telling the directors things they may not want to
hear - unpleasant for both the client and agency.
‘When a company goes off the rails it’s because they weren’t listening
to what the analysts and institutions have to say,’ argues Focus
Communications joint managing director Rupert Ashe.
Communication direct with institutional shareholders lies squarely in
the realm of IR (see panel, p11). But as mentioned earlier, these
influential stakeholders can also be targeted through the financial
media. Reaching them in this way can be seen as the number one function
of City PR.
In Europe, the Financial Times, Economist and Wall Street Journal are
still seen as the most authoritative titles, along with the business
pages of the national newspapers. Although it’s interesting to note that
the UK market is being swelled by the launch of the City-specific London
Financial News and the more general Sunday Business.
For the moment the jury is out on the likely importance of these
newcomers and the much-trumpeted growth of business TV in the shape of
European Business News and FT-TV among others.
‘It’s not clear to me that the right package and product is with us
yet,’ says Financial Dynamics chief executive Nick Miles. ‘Broadcasters
have got to get over their obsession of going for the lowest common
denominator and explaining everything.’
‘My feeling is that at this point specialist financial TV is at the
margin,’ adds Tony Carlisle, executive chairman of Dewe Rogerson’s
London office. ‘I don’t really know anyone who watches it.’
That, of course, could change as business television becomes more
established. Its very immediacy gives it one distinct advantage over the
press - but then again denizens of the City are able to get the latest
news and price information from their screens.
So, logically, if it is to make any real inroads on the hegemony of the
press, business TV will have to provide the added value of in-depth
comment and analysis that is the strength of the newspapers. None too
easy given the nature of broadcasting.
The Internet is also likely to have a profound impact. Vast amounts of
financial information will be put out via the World Wide Web. Shandwick
Consultants director Gillian Pattison, for one, believes that financial
PR consultancies will have to ‘speed up’ their dissemination of
information, maybe even updating what is sent out electronically every
Talk of the Web brings us neatly enough to the issue of globalisation.
Finance is international. One of the questions that financial PR firms
of a certain size have to address is whether or not they too should
Some think not. ‘I’m very suspicious of global structures for small
service industries,’ says Fishburn Hedges chairman Dale Fishburn.
The financial specialist which has been most successful internationally
is Dewe Rogerson, which now has about 50 staff in New York and offices
in Hong Kong, Tokyo and Bombay, plus another 20 London-based staff
working on international business.
During the 1980s DR carved out a niche for itself as a privatisations
specialist. Its expertise in this field has been rewarded with a slew of
Those consultancies with a significant and growing international
capability, like Dewe Rogerson and Gavin Anderson, have become part of
small elite able to offer global financial PR services. Yet for the
many smaller or less internationally-minded consultancies, the amount of
UK M&As, flotations and on-going domestic communications means they will
not be forced into embarking on risky, capital-intensive overseas
expansions if they do not wish to do so.
Investor relations: Breaking the securities houses’ hold
Where does financial PR end and investor relations begin? It’s a vexed
question and the answer has important implications for the relationships
City PR consultancies have with the securities houses and investment
banks with which they need to work closely.
‘The real question about where financial PR stops and IR starts has to
do with how far you should push the service without getting in the way
of other advisers,’ says College Hill chairman Alex Sandberg. ‘There’s a
grey area between all of us and handling that grey area sensitively,
without treading on anybody’s toes, is the key.’
Sandberg adds, however, that IR should, in the main, be carried out by
the client and its broker. That view is backed by Philip Hooker,
divisional director of Hoare Govett Corporate Finance, who asserts that
IR is ‘fundamental’ to broking activity.
There is no great tradition of financial PR firms carrying out IR
programmes in the UK, unlike the US. However, in a move to add value for
their clients, some UK consultancies have edged tentatively into an IR
sphere normally associated with the banks and securities houses.
Typically this has manifested itself in the provision of services such
as share register analysis and roadshow organisation. But many in the
City believe that PR agencies simply don’t have the resources to offer
‘Where the difference comes in is the in-depth knowledge of what the
institutional investors are doing,’ says SBC Warburg director and head
of institutional IR services Julia Land.
‘A financial PR company just can’t replicate the nexus to the market
that an investment bank or broker has,’ adds Land, who heads up one of
the few investor relations consultancy services that is integrated
within an investment bank.
That said, two outfits have bucked conventional wisdom. Makinson Cowell
and Frew Macmaster have carved out a niche for themselves as specialist
investor relations consultancies. They work closely with the boards and
internal IR staff of their listed clients to ensure that relationships
with institutional investors remain sweet.
From a client’s standpoint, what matters most in the implementation of
financial PR and IR programmes is that they don’t send out contradictory
messages to the institutions. A fund manager will be confused if he or
she gets one message from communication directly with the company and
quite another from what is said in the media.
Burmah Castrol director of corporate affairs James Alexander sees IR and
PR as ‘inextricably intertwined’, and argues that it is wrong for
clients to put them in separate departments.
‘I’m sometimes surprised that investor relations is hived off and left
as part of the finance function,’ says Alexander. ‘Clearly you’ve got to
work closely with the financial side but it has always made sense for us
to have the two in the same department.’ In addition to its in-house
operation, Burmah Castrol relies on its broker Cazenove for IR advice
Financial reports: Europe catches up
The Anglo-Saxon model of communicating financial performance -
including the use of the English language - is increasingly being taken
up by Europe’s most successful companies, judging by the findings of the
1995-96 Company Report. There has also been a dramatic process of
standardisation across Europe’s top 100 companies over the five years
that the report has been published.
Laughable translations have almost completely disappeared and most of
the top 100 companies’ reports now excell in English. Anglo-Saxon
brevity in the first part of a report has started to spread to the more
verbose cultures of Germany, Spain and France, making for better
readability. Preparation of accounts to GAAP (American) standards is
now mentioned in 20 reports, and 40 companies show the progress of their
share in good charts.
The sector that produces the best reports remains the food and drink
industry, while insurance remains the least impressive, weighed down as
it is by Italian and German companies that do not match the European
norm. Within the insurance sector, Prudential shows the most
improvement, reaching 12th in the top 100. Swiss companies have
consistently high standards over all the sectors, and the British lead
in terms of ranking.
In short, we are seeing briefer reports in English, more targeting of
the American market, and the privatised utilities are moving towards
less institutional reports. Standards are definitely rising, but there
are still reports out that are more like codes to be cracked than
The message that shareholders want to hear above all is a message about
long-term prospects. So the annual reports that reveal a strategy, and
targets for the future, are the winners. For the 1995/6 report we
carried out research that shows that both professional investors and
private shareholders put the annual report ahead of all other sources of
information about a company.
For the first time this year, we also looked at the cost of producing
annual reports. The range of budgets, including design and printing,
quoted by the companies themselves ranges from pounds 124,000 up to
pounds 1,800,000 with a median of pounds 430,000.
Other aspects of the communications effectiveness that we looked at
include the length and style of the chairman’s statement, use of
editorial techniques (such as subheadings) for better readability, key
messages, narrative style and the way photography supports a strategic
message. We then ranked each annual report on the basis of an aggregate
of scores against these and other headings.
Topping the charts was Hoeschst whose annual report scored 715 out of a
1,000, closely followed by Grand Metropolitan’s bullish offering and
annual reports produced by Tesco, Bass, Societe Generale and Allianz
Peter Clifton is research manager of Peter Prowse Associates and editor
of the 1995-96 Company Report.
Financial worries: Issue of regulation won’t go away
For Financial Dynamics, the consultancy that has been one of the star
performers in the City PR sector, the past six months must seem like a
bad dream. First it was rebuked by the Takeover Panel for ‘serious
breaches’ of its code regarding the leaking to a broker of price-
sensitive information on its client Amec, which was at the time involved
in a takeover battle with Norwegian group Kvaerner.
Then the London Stock Exchange began investigating dealings in the
shares of another of FD’s clients, building materials group Caradon,
following unusually heavy trading in its equity ahead of last
September’s interim results announcement. The Exchange won’t comment on
its findings, but has passed its report on to the Department of Trade
and Industry for consideration.
Although no allegations of impropriety have been levelled at FD over
Caradon, the consultancy’s name has appeared in much of the media
coverage of the affair, inflicting further damage on a reputation
already hit by the criticisms of its activities relating to Amec.
All of this has re-ignited the debate on the regulation of financial PR
firms. At present, although City PR consultancies must conform to the
law of the land and rules of the Stock Exchange and Takeover Panel,
agencies do not have a regulatory body of their own, as is the case with
stockbrokers and investment banks.
The City and Financial Group of the IPR has been looking into the matter
of financial PR-specific regulation but so far all that is clear is the
polarisation of views among practitioners, with some championing
additional regulation and others happy with the system as it stands.
‘The rules that exist are good rules, and there are sanctions if they
are broken,’ says FD chief executive Nick Miles. ‘At the moment I think
it’s right that we’re held to account by the Takeover Panel and Stock
Many City PR luminaries agree, feeling that the rules set out in the
Takeover Panel’s ‘Blue Book’ and Stock Exchange Listing Rules ‘Yellow
Book’, plus the law enshrined in the Companies Act, Financial Services
Act and Criminal Justice Act, provide ample regulation. ‘I think the
system works. Recent events have proven it,’ says Citigate deputy
managing director Jonathan Clare.
NatWest corporate affairs director and IPR president-elect Simon Lewis
takes the contrary view, arguing there is a need for greater
‘When things go wrong the only way financial PRs can be admonished is
through the Takeover Panel or Stock Exchange,’ he says. ‘What I’m saying
is that’s no longer tenable. We must have a greater degree of
accountability exactly as there is for any other discipline in the
Focus Communications joint managing director Rupert Ashe also supports
greater regulation, although conceding it is partly for reasons of self-
interest. ‘We look forward to regulation because it’s another barrier to
entry,’ he says.
‘With practitioners so divided, it’s difficult to see any wide-ranging
changes taking place soon. But even if the regulations remain as they
are it would seem that the activities of financial PRs will be subjected
to closer scrutiny - in the wake of the Amec affair Takeover Panel
chairman Sir David Calcutt wrote to all financial PR consultancy heads
reminding them of their responsibilities under the panel’s code.