Advisory vs IR

Both the advisory and investor relations businesses are changing and the intersection of these services is becoming more important to understand. In the past the two often didn’t meet but today there is mutual benefit to working together.


We put the diagram together to illustrate the difference between what we do as advisors and what an external investor relations firm (or internal IR function) does for a company. The primary role of an IR function is communication. It is demanding and has many facets even beyond what we show here but it is fundamentally different from the independent advisory work and deliverables that we provide. In many ways IR about amplifying your internally sourced information and development to the investment community while what we do is put those in an externally aware investment context.

Here are the key elements:

  1. Our own independent positioning of the company is based on work both inside and outside the company that includes an analysis of the market, customers and competitors. Investors value supported facts and information discover more than company-sourced information.
  2. We develop a financial model and apply our proven intrinsic valuation model to provide a firm estimate of how the market will eventually value the company as they execute and fundamentals are more fully realized. Before a prospective investor takes the time time and effort to do their own work, meet with management and propose an investment in your firm they like to know if there is an exploitable gap between market expectations and company valuation.
  3. Because we have had scores of advisory relationships over the years we are in a position to assist in other areas like strategy, capital raising, M&A and business development. We’re not an investment bank but we can provide input and make direct introductions in all these areas when there is a good fit. It’s an extra benefit that clients get that sometimes ends up being the most valuable part of what we do.
  4. Although it’s not mandatory we suggest that clients take advantage of our research distribution capabilities at Research 2.0 (R2) which uses numerous online channels to reach hundreds of potential institutional and retail investors as well as sell-side research organizations and broker/dealers.

The two functions complement one another. We see IR as a necessary function for any public company and one that’s important to do well. At the same time investors are looking for independent analysis and research on the company as well as estimates, a financial model and informed views on valuation.

 

 

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