If your organization has recently completed, or is planning to complete, a large acquisition or merger, then hosting an investor day to share the details of the transaction is likely on your agenda. Given everything that goes into planning and executing such an event, not to mention the importance of the messaging itself, it’s critical to get the details right—your stakeholders are counting on it. And they often have very specific expectations about when and what you should share.
Here are a few verbatim comments from investors that reflect what we hear most often during our pre- and post-transaction survey work. Using this feedback to help shape your investor day agenda can help you deliver an event that hits the mark.
“We expect something that bridges between the initial announcement and what you have learned post-close.” – Mid-Sized Value Investor
In other words, don’t schedule your investor day too early. Give it a few months between the close of the transaction and the event to let the smoke clear, get your management team together, and let them start making progress on the integration. Investors will be looking for information that helps them not only better understand the strategy of NewCo, but also reshape their financial models.
This ensures you have access to the detailed financial and operational metrics about the new acquisition. And it gives you a chance to develop some meaningful observations and set quantified objectives. For example, if the merger is an opportunity for consolidation and/or diversification, having a few months to start implementing those strategies before you formally address your investors will allow your management team to tell a more defined story.
“What I really want to know is: is this a defensive play? Is the company now better positioned to weather a downturn than it was in 2008?” – Large Value Investor
Given growing concerns around a potential economic downturn, the onus is on you to justify why continued investment in a specific industry makes sense, especially if it’s a cyclical industry and the economic cycle is getting weaker.
Retell your industry story and put emphasis on how the acquisition strategically insulates your organization going forward. For example, if you now offer a more diverse product line as a result of the transaction, speak to how your additional offerings will help ensure revenue growth. Or, if you were a U.S.-only business that has acquired or merged with a foreign organization, speak to how operating on a global scale can help offset a possible downturn in one area of the world.
As one mid-sized value manager put it, “I think the industry at large is obviously highly cyclical but has GDP growth if you play on a global scale. If a company can have global GDP growth for the industry and outgrow on top of that, and operate with some level of margin expansion, they may be the best play in the industry right now.”
“From what has been disclosed, I think the companies should fit well together and grow the business. But it is hard for me to value the two businesses going forward without more information.” – Mid-Sized Growth Investor
Be as detailed as possible when it comes to sharing the financials. Companies typically do a good job communicating the cost synergies that will result from a transaction. But they hold back or even sandbag when it comes to giving guidance around revenue synergies. And many investors may be waiting on the sidelines until there is more clarity in this area.
The reality is, with many strategic acquisitions, 1 + 1 = 3, meaning the combined organization will attract new customers and sales outside of their current revenue base because of their newly strengthened position. Putting specific numbers around this can be hard, and companies don’t want to overpromise and underdeliver. But if you don’t comment at all, you risk frustrating your investors.
Even if you can’t quantify the opportunity in hard numbers, be sure to use your investor day to outline your strategy to achieve top-line synergies and put some color around your expectations. Speak to the most promising opportunities you plan to pursue and discuss what you see as the low-hanging fruit, or areas where you believe the newly combined organization will win quickly. This will help your investors more clearly understand the full potential value of the deal.
“I want to hear from the management team that is going to run the company going forward, not a team likely to transition in the next 12 months.” – Large Cap Value Investor
A post-acquisition investor day may be your first opportunity to introduce investors to the new management team. This is another reason to wait a bit after the close to host the event. You want to give the new team adequate time to prepare and align around near-term objectives so they can present a unified front.
Investors will be looking closely for signs of cohesiveness and strong collaboration. They’ll want to know that everyone is on the same page and working toward the same goals; some investors may even be planning to toss out some tough questions just to see how management responds. Being united around your most important opportunities and initial areas of focus will help increase investor confidence in the new management team’s capabilities.
“What makes this interesting is that you have a great operator, and a company that has consistently outgrown its market, now doubling in size. I think the potential there is difficult to quantify and could have a lot of upside.” – Large Value Investor
Capitalize on the interest you generate, and never stop selling your strategy. Remember that investors are looking at hundreds of companies every week and it’s possible for your opportunity to get lost in the shuffle, especially among investors who are not significant holders or who don’t cover your industry extensively.
Be sure to begin and end all acquisition discussions by very succinctly articulating your key messages, including why the valuation is justified, how the acquisition is strategic, and what it means for future growth. Outlining a clearly defined roadmap can be a useful tool for outlining the longer term potential for the new business and reinforcing your key investment thesis. Consider how messaging narratives delivered at the investor day can live on after the event in follow up communications. Be sure to repurpose and reuse messaging in materials such as the investor deck, fact book, and website to continually reinforce your strategy and keep it in front of investors.
Make it a day worth everyone’s while. A post-transaction investor day is arguably one of the most important opportunities you have to engage current and potential investors and build confidence in your strategic growth plans. For more insight into what investors are hoping to learn from the day or how to translate their feedback into a high-impact event, give us a call. We can help you create an on-point event that answers your investors’ most pressing concerns and returns the greatest possible value for your organization.