How are IR teams making use of outsourcing?
IROs say they will engage external firms for targeting, feedback and LinkedIn services
IR teams need to punch above their weight. While typically small in size, their responsibilities cover a wide range of crucial areas, from reporting and disclosure to strategic messaging, corporate access, market intelligence and much more. And the demands keep growing, with ESG issues increasingly seen as part of the IR remit.
As a result, outsourcing plays a vital role in helping IR departments achieve their goals. Around a third (34 percent) of the average team’s budget is spent on external services, according to IR Magazine’s Global Practice Report 2023, a rise from 28 percent in the previous year’s research.
To explore the issue of outsourcing further, IR Magazine surveyed 340 IR professionals from around the world on how they use external services in 13 areas of activity, ranging from perception studies to investor targeting and annual reports.
Most-outsourced activities
Transfer agent/shareholder registration is the most commonly outsourced activity, the study finds, with 77 percent of respondents selecting this option. The next-most popular activities to outsource are shareholder ID/register analysis (64 percent), annual report design (58 percent), proxy solicitation (51 percent), IR websites (49 percent) and perception studies (47 percent).
There has been little change in the results since IR Magazine last conducted a survey on outsourcing five years ago, with the top six most-outsourced areas remaining the same. The percentage of companies that outsource each area is also largely consistent across the two studies. The biggest deviation within the top six is with IR websites: the proportion of companies working with external service providers on this task has fallen from 56 percent in 2018 to 49 percent in 2023.
The least-common areas for outsourcing are IR strategy (3 percent), followed by corporate communications (9 percent) and financial PR (14 percent). Over the last five years, there has been a drop in the number of companies outsourcing roadshows, meetings and events (down 6 percentage points to 22 percent) and targeting (down 3 percentage points to 24 percent).
By contrast, the proportion of companies working with external providers on two tech areas has risen: social media monitoring stands at 30 percent in 2023, up from 24 percent in 2018, and IR apps have risen from 28 percent to 32 percent over the same period.
Personalized perception
Claire Roblet, head of IR and financial communications at Kering, the French luxury goods company, describes her approach to outsourcing as ‘more or less traditional’. The IR team makes use of third parties for responsibilities like shareholder ID, perception studies and running the AGM (votes, livestream, etc).
For the annual perception study, Kering works with a trusted freelancer rather than a big IR firm. ‘[He takes] a very customized and personalized approach, covering both the buy side and sell side,’ she explains. ‘He has built a relationship with most of the respondents, so they feel very comfortable talking to him. And everything is anonymized afterwards.’
The study is conducted between mid-November and early December, an ideal time given that investors and analysts are under a little less pressure, and the company can work the results into its planning for the next year, says Roblet. The findings help to inform full-year results, capital markets days and broader corporate messaging, she notes.
Kering’s six-person IR team is slightly smaller than the average for a European mega-cap (which stands at eight, according to IR Magazine data). But the owner of brands such as Gucci, Balenciaga and Saint Laurent still has enough manpower to run a lot of activities in-house. Indeed, the preference is not to outsource where possible, says Roblet, because it’s important to stay on top of the details and provide training to new team members.
‘People learn how to complete consensus and read analyst models – it’s extremely important to teach the younger generation how to do things,’ she says.
Extra help
Where would companies bring in additional services if they had the resources? The IR Magazine research finds that perception studies, selected by 33 percent, would be the most likely area, followed by social media monitoring (31 percent), IR apps (also 31 percent) and targeting (29 percent).
Given that 47 percent of respondents say they already outsource perception studies, that means just one in five respondents are not interested in making use of this service from third parties.
While the percentage of IROs outsourcing IR apps has risen by 4 percentage points since 2018, the proportion who say they are considering outsourcing in this area has dropped by 16 percentage points over the same period, indicating an overall fall in interest.
The two least-outsourced services currently – corporate communications and IR strategy – also appear in the bottom five areas IROs would outsource if they had the resources, highlighting a strong preference for maintaining control internally.
One-woman show
Irina Zhurba, head of IR at Mister Spex, the German small-cap optical retailer, is – in her own words – a one-woman show, emphasizing the crucial role outsourcing plays in accomplishing tasks. But communication or storytelling is one area she would always keep in-house.
‘I definitely don’t outsource the presentations, messaging or visuals,’ she says. ‘I have a very strong opinion on what we should say and how we should say it. Even if it’s not the most aesthetically pleasing way of presenting certain data, if it helps an analyst derive a model better, I’m all for that.’
Zhurba says her IR budget stayed flat between 2022 and 2023, but could increase this year to incorporate a real-time investor feedback service she is interested in. ‘When I started in IR seven years ago, we still had brokers giving us post-conference investor feedback, which we don’t have any more,’ she says. ‘I like feedback because it’s relatively easy to obtain and we can track how it develops over time.’
She adds that many funds have rules that prevent them from sharing feedback with the sell side but, if the request comes from the company, the funds are more likely to supply their thoughts.
Beyond traditional outsourcing areas, Zhurba notes that a lot of decisions will be company and sector-specific. For example, last year Mister Spex brought in a broker to help connect with the retail market, and in 2024 will consider another focused on family offices.
With the market cap down more than 80 percent since the 2021 IPO, Zhurba says the company must think about which investors can take a position at the current time. She is also comfortable paying for broker support and research, given that the retailer already has six regular covering analysts. ‘I would have an issue if all my research was paid for,’ she says. ‘But I’m fine with two out of eight.’
If resources were no object, another area of interest would be social media content, adds Zhurba: ‘I would get a consultancy or designers to post regularly and create videos for LinkedIn. But I can’t sell to my management a 20-second video for LinkedIn about second-quarter results. We’re not the right sized company to be doing it.’
Spend and satisfaction
Looking across all companies, IR Magazine research indicates that spending on key outsourcing areas has fallen over the last five years. The largest chunk of the average outsourcing budget is spent on annual report design, but costs have fallen from $48,000 in 2018 to $41,000 in 2023.
Shareholder ID/register analysis spending is also down (from $21,000 to $16,000), as is proxy solicitation (from $21,000 to $18,000). Among the top six most-outsourced areas, only IR websites have seen a rise in spending over the last five years, climbing from $18,000 to $20,000.
When asked about satisfaction, IROs say they are broadly content with the most popular areas for outsourcing. Approaching nine in 10 respondents (86 percent) say they are either satisfied or very satisfied with shareholder ID/register analysis work, while the figure is 85 percent for annual report design. There is slightly less contentment with perception studies and IR websites: 74 percent and 69 percent, respectively, say they are either satisfied or very satisfied with the work done for them by external firms.
How do IR teams pick partners to work with? According to the research, a firm’s reputation is most important. This is the top priority for 56 percent of respondents and 88 percent include it in their top three priorities. Cost-effectiveness comes next, selected as the top priority by 21 percent and placed in the top three by 84 percent. Two other important considerations are compliance with your firm’s policies and longevity of a firm in the market; both were put in the top three priorities by around half of respondents.
Targeting options
Roblet says an area of outsourcing she would consider if budget permitted is targeting. Kering has one team member dedicated to corporate access but that person is very stretched, given the amount of incoming requests for meetings the company receives, so there is limited time to dedicate to identifying new investors.
A worry, though, is that previous experiences with external targeting services have not been satisfactory. ‘To be honest, when I have used targeting services in the past, I have never been completely overwhelmed by the results,’ Kering says. ‘Sometimes they flag investors we know well. They also make comparisons with peers, which we can do ourselves.’
Like many other IR teams right now, Kering’s is also exploring the potential of AI-powered technology. Roblet doesn’t describe this as outsourcing but rather using internal tools to make the team more efficient and free up time for more strategic activities.
Again, part of the thinking here is to make sure the team is still carrying out tasks itself, rather than fully handing off responsibilities to an outside firm or, in the case of AI, an algorithmic model.
‘Now you have tools that make a live transcript for you,’ Roblet says. ‘But we are still listening to the calls. It’s useful to hear how people answer questions, what tone they use and whether they want to provide more information or not. IR is about feeling the pulse of the market.’
