Private equity investor relations (IR) departments are responsible for providing investors with proper and accurate accounts of a potential investment. Investor relations professionals usually work closely with a company's legal, accounting, and executive management departments.
As a service of the PR department, IR professionals communicate with institutional investors, shareholders, government departments, and other related stakeholders. As a result, an investor relations team should be aware of shifting government and regulatory changes in terms of what can be said about a company. This isn't limited to press releases but includes all types of communication outside the company.
Since IR professionals have to juggle many moving pieces and work with various departments, it helps to have a strategy in place.
What is a private equity investor relations strategy?
A private equity investor relations strategy is similar to a PR strategy. The exception is that the audience is almost always made up of investors and shareholders, and so the formality and structure of its communications must be professional and compliant.
Generally, a successful strategy hinges on transparent and compliant investor presentations. IR professionals typically employ the following best practices:
- Having a consistent and clear story that highlights the company's competitive advantage.
- Carefully choosing conferences and other events to meet with potential and existing investors and shareholders.
- Providing transparent data and analytics for investors on the website.
- Sticking to the set public relations schedule for releases.
- Keeping up with relevant regulations and updating investor-related assets regularly.
- Planning for potential emergencies and sharing this information companywide.
- Collecting data and feedback from existing investors to present to the management teams.
A solid strategy seeks to mitigate risks, address liabilities or weaknesses, and support the shareholders.
Accuracy matters when representing an organization
Accurately and comprehensively presenting a company does more than maintain compliance. For a PE firm, it fosters loyalty and trust among shareholders. It also contributes to a private equity firm's credibility in the investing space. Furthermore, it enhances the long-term value of both the firm and its investments and lowers the cost of capital.
Best practices for IRs in the field today
Ultimately, IR professionals in private equity walk the fine line between accounting, legal, management teams, and public relations. They not only must inform investors of the firm's latest news, but also meet with numerous external actors. After all, a portfolio company’s reputation is everything to them.
1. Conduct thorough research
Fundraising in today's environment is more difficult than ever, and institutional investors are cautious about their investments. Fund managers need to make time for comprehensive investor research to ensure they spend time with investors who are likely to commit.
2. Customized pitches and strong storytelling
Not only should investor presentations contain compelling stories that paint a picture of the firm, but they should also be customized for specific investors. This will not only build trust but increase the chances of gaining funding.
3. Review the firm's performance
IR professionals should regularly audit their private equity fund performance and present its findings to the management team or managing director. Keeping a pulse on the internal data will make it easier to communicate with shareholders and answer questions from potential investors.
4. Use effective communication
An IR department should have a streamlined channel or strategy to easily and effectively communicate with all stakeholders. At the same time, there should be a way for companies to receive feedback from their shareholders, managing director, and other contributors.
5. Have a contingency plan
In case of a crisis, there should be a plan in place to help IR departments jump into action. Shareholders and investors will want immediate updates and transparent communication in times of trouble. Crisis management and communication disclosure are critical for any organization. Having strategies already in place can reduce stress and mitigate losses.
The importance of IR relations
Private equity investor relations is here to stay. In fact, the role of IR professionals is more important than ever. Management teams who want to obtain funding or founders who are currently fundraising will need a clear investor relations strategy and a dedicated IR team as they grow the business. With the frequency of cross-border business and investing, having a team in place to take care of complex government regulations regarding securities and communication will be vital to avoiding PR troubles and retaining investor loyalty.