Competing for Capital on a Global Stage
By Ian Bailey, Managing Director, Financial Communications
Fundamental shifts in capital flows are leading to more opportunities despite current turbulence in traditional capital markets.
While 2007 proved to be a highly profitable year for the financial PR industry owing to private equity, sovereign wealth funds and frenetic M&A activity, 2008 started with little cheer for the broader investment community, except for those involved in advising on matters related to corporate restructuring or distressed debt. The year kicked off against a backdrop of massive sub-prime write-offs, stalled deals and predictions of tens of thousands of City and Wall Street job losses in the coming months.
It is undeniable that in recent months we have witnessed a dramatic slowdown of public fundraisings and IPOs on established bourses, with market commentators variously pronouncing Europe 'shut' or 'dead' for new offerings. While New York and London squabbled over financial market primacy and traded allegations of casino-like marketplaces and stifling over-regulation, emerging markets not-so-quietly stole the spotlight as an increasingly attractive opportunity for both companies looking to raise funds and institutional investors seeking alternative investment options.
Still, the first quarter saw record-breaking IPOs, such as Visa in the U.S. and India’s Reliance Power, and growing interest and investment activity in the MENA region and sub-Saharan Africa. It cannot be ignored that Zimbabwe attracted greater listing volume than London in the first quarter of 2008. And try as they might, no one can dismiss as “post-holiday lull” the fact that U.S. fundraising in the first quarter, absent Visa's multi-billion dollar NYSE debut, lagged behind Vietnam and Saudi Arabia by volume. The emerging moral of the story? For a compelling investment story delivered by a well-prepared management team that is willing to travel, funds can always be raised.
Although it may be an unsettling time to be in the PR business if reliant on traditional M&A and IPO activity in London and New York, it is definitely an interesting time for the diversified global players. Companies are now looking to experienced advisors, whether banker or financial communications consultant, to help guide them through the mysteries of raising debt and equity, and communicating with the investment community in established and emerging markets. Likewise, governments and companies in nascent emerging markets are turning to international industry experts to help them establish a framework and reputation for best practice in all matters, including financial communications and commitment to financial transparency.
More international companies are also investigating separate listings of local assets and operating units on stock exchanges in emerging markets. While presenting additional logistical and administrative burdens, the potential benefits are many, ranging from valuation and establishing meaningful currency for attracting and retaining employees and acquiring businesses to building a local profile and brand loyalty in key markets.
Tapping into a global network of more than 130 offices in 80 countries, we at Weber Shandwick Financial have a clear advantage when it comes to providing clients and fellow advisors with access to both local market knowledge and depth of experience with international best practice. Our team members are currently on site ‘in-country’ working with management teams to prepare for IPOs on the Cairo and Alexandria Exchanges in Egypt and the Lusaka Stock Exchange in Zambia, and planning is under way for similar trips to Mauritius and Bahrain. And in 2007, we were on-site to assist with one of the largest IPOs to date in the GCC region, Kingdom Holding Company, which listed on Saudi Arabia’s Tadawul with a valuation of £8.6 billion.
Regardless of geography or sector, investors and analysts still cite management credibility as one of the primary factors in their decision to invest in or issue positive research coverage on a company. Investors are still ultimately making a bet on the management team and a belief in its ability to execute to plan.
To create long-term shareholder value, companies must not only deliver superior corporate performance, but also actively develop and maintain corporate credibility through effective and honest communications with the investment community. Raising money from investors creates an obligation of ongoing, consistent communication and periodic face-to-face meetings – regardless of location. The external perception of a company, the credibility of its management team and the perceived successful execution of its strategy are dictated by the manner in which it communicates with those investors.
Much recent debate has centered around whether a permanent decoupling of emerging markets from the old hegemony of the U.S. markets is taking place. It’s far too early to tell, but to focus on it unduly is to miss the point. New York and London will continue as key hubs of global capital markets activity. But it is equally clear that other markets are growing fast and offer intriguing and real alternatives, with quantifiable cost, liquidity and profile benefits compared to the traditional exchanges. It may be a more complicated world, but for companies seeking funds, investors seeking returns, and experienced advisory teams with up-to-date passports, that is not necessarily a bad thing.
Click here to download the article from the PR Week supplement 'Financial Essays' May 2008.