When Adidas-Salomon, the $5 billion German sports goods maker, announced it was to pay $67 million for a stake in Bayern Munich, Germany’s top soccer club, shareholders quickly reached for their red cards. Concerned about the deal’s timing and price, investors sent shares tumbling more than 8 percent to E55 ($49) when the announcement was made on September 18. Three days later Adidas’s share price had slumped to a three-year low of E46.
It was a testing time for Robin Stalker, CFO of Adidas. “The response from shareholders was definitely much more negative than anticipated,” recalls Stalker. So, working closely with Natalie Knight, the company’s head of investor relations (IR), he quickly devised a plan of action. “We’d issued press releases and staged the conference calls, but when it became clear that we were not getting the message across, we immediately got the IR machinery further into gear, and set up one-on-one contacts with key investors.” The pair were on the road for the best part of a week.
As an exercise in damage limitation, the road show was a success. By October 1, the CFO/IR double-act had won over enough investors to nudge Adidas’s share price back to pre-announcement levels. “This was a time when not many people were travelling, following the terrorist attacks in America,” says Stalker. “But there was a need to address the criticisms we were hearing. It was a comfort to investors to have us on the road.”
Stalker’s experience is one of many examples showing how tightly knit finance and IR have become in corporate Europe. According to James Gray, managing director of Spencer Stuart Talent Network UK, a search firm, the two functions have grown closer in recent years, in large part because “executive boards across the continent have come to recognize that their primary audience is their current shareholder base.” So, he says, where IR was once a support service buried within communications departments, it’s now more likely to have a prominent place in finance.
The trend comes as no surprise to Knight of Adidas, who explains: “It’s critical to have day-to-day knowledge of the whole financial system that you can present to shareholders, and you can’t get that better or faster than directly from the CFO.” But like any relationship, that between the CFO and IR manager needs a fair measure of special nurturing to make it work.
Just ask Sten Fornell, CFO at Ericsson, Sweden’s $25 billion telecoms giant. Since becoming the group’s CFO in 1999, Fornell has endeavored to bring Ericsson’s finance and IR teams closer, encouraging co-operation and transparency. “What all investors have in common is an interest in numbers and financial performance,” Fornell says. “So teamwork between IR and finance is quite natural.”
Fornell regularly dispatches junior finance staff to work part-time in IR, while supporting the appointment of senior IR staff with a background in finance. “Experience from the financial area often means a good orientation about our reality and challenges,” he says. “That is something to capitalize on for interaction with the investor community.”
The company’s current head of IR, Maria Bernström, held various positions in finance and controlling at Ericsson before moving to IR in November 2000. “Sten is keen on keeping IR continuously in the information flow,” Bernström observes. “It’s all about consistency — in this turbulent market, it’s even more important that the same messages are circulated, both internally and externally.”
Similarly, when Stalker was promoted to CFO from head of group reporting and taxes in February 2000, he wasted little time in smartening up the company’s IR program. One of his first acts was to change IR’s line of reporting so that it fell under the responsibility of finance, rather than communications.
Once again working closely with Knight, he also launched Adidas’s first-ever “Investor Day.” Held in New York in October last year, the event was designed so that investors could meet new management face to face and see the latest products and promotional materials.
These days, Stalker explains, “Natalie and her staff are an integral part of my senior management team. She has full access to everything we’re doing.”
For more about investor relations on the Continent, visit our sibling publication CFO Europe (www.cfoeurope.com).