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The Art of Communicating IR-Value By Lynge Blak


Effective management of investor relations is a crucial advantage for any company and ensures the alignment of shareholder interests.

How can these relationships be managed efficiently and harmony of interests maintained? What tools need to be used? The secrets are revealed in the following interview with Mr. LYNGE BLAK, renowned expert in Investor Relations.

CENSERE: Why do you see communicating IR-value as an art?


Because I believe that re-learning how to create and measure value in the tried-and-true fashion is an essential step toward creating more secure economies and defending ourselves against future crises.

The guiding principle of value creation is that companies create value by using capital they raise from investors to generate future cash flows at rates of return exceeding the cost of capital (the rate investors require as payment).

The faster companies can increase their revenues and deploy more capital at attractive rates of return, the more value they create.

The combination of growth and return on invested capital (ROIC) relative to its cost is what drives value. Companies can sustain strong growth and high returns on invested capital only if they have a well-defined competitive advantage.

This is how competitive advantage, the core concept of business strategy, links to the guiding principle of value creation.

CENSERE: So what strategies do you recommend for listed companies and private equity funds?


The importance of communicating the company’s competitive advantage, and key value drivers, is not very different whether it is private company, or a public company seeking capital through traditional fund raising at a stock exchange, or a private equity fund engaged in fund raising.

In principle you start, first of all, with a process to determine the investment proposition your company presents. How you are perceived in the capital market or by the investment community? For this we use tools to take the market temperature – what we in the Investor Relations field call Investor Perception Surveys. The process is tailor-made for individual company needs and purposes, but in the final product the survey will determine what the investors like and dislike about the company’s business concept, the investment case, issues in regard to corporate governance and transparency, management credibility and the impact of soft value on the intangibles, and naturally on the function and services provided by the company’s IR function.

CENSERE: How do you use this survey to identify the right type of investors for your project?


The survey will focus on why the company’s investment peer’s – investors who have invested in the company’s competitors and not in your company – and what we as company or private equity fund can do to attract the interest of this group of benchmark investors. What is it about key value drivers that have attracted the investment peers to invest in your competitor? How can we change that?

CENSERE: Can you give examples of how you change the investor base to draw in these investors?


Yes, certainly, the exercise to identify the right type of investors, and for that matter the analysts who do not cover your company, called Investor Targeting in strategic IR language. In short it involves the introduction of a policy in the company where the IR function aligns the company’s shareholders, or the investor base for the private equity, with the long term financial and strategic direction of the company – to create a higher level of “fit” that leads to

optimal valuation, lower cost of capital and lower volatility.

CENSERE: Sounds like an interesting proposition. You create a demand and supply scenario for the company’s shares or bonds, or for the private equity fund the investment offerings, which leads to a higher value for the company or fund. As such, you narrow the bid and ask price of the equity which lowers the cost of capital, and at the same time with a different mix of long and short term investors you lower the volatility in the stock price and volume. Is this correctly understood?


Yes, absolutely, this is both theoretically and practically perfectly understood. It enables the IR function to establish an IR performance measurement system that will give insight into whether the Investor Perception Survey has been effective – if it has created value.

CENSERE: So far you still have not been in direct contact with investors and analysts – how do you make sure these findings in the survey connect with the target groups?


For this, we build-up a corporate and financial communication strategy based on the agreed IR Policy between the IR function and the Management – or as it is called here in Hong Kong, the Shareholder Communication Policy, though the content of policies here differs substantially from the policies we operate with in other parts of the World.

IR-Targeting enables potential investors to be identified on the basis of predefined criteria like company risk assessments, return of capital, and trading liquidity characteristics. To ensure the investment message gets across to these target groups, the company or private equity fund must issue information in a timely, updated, accurate, and adequate manner. In the language of Investor Relations, we operate with the expressions that the company must use to ensure a consistent and continuing communication strategy.

CENSERE: Interesting – how do you build up such a platform?


We build up a set of guidelines for effective IR communication.


To build this communication platform, that deliverers your message to the target audience, we use a wide range of specialized IR tools that are individually introduced, and used for specific purposes, with the individual target groups of investors, analysts, and the financial media.

The IR tools including:

Analyst meetings

Company site visits / capital market days

Earnings / operations conference call

E-distributions of news

Fact sheets

Financial media

- Electronic

- Print

Industry conferences

IR Apps

IR website

Investors forums

Road shows

Sale/traders briefings

Trade journals



To sum up all these services, in addition to my IR advisory and training, I also have a part-time function in the German EQS Group newly established “one-stop-shop” for Hong Kong based specialists in Online Investor Relations and Corporate Communications.

As a listed company – or for that matter a private equity fund – you will require stringent and professional handling of the many tools and services available for the handling of a broad spectrum of information issues and fund raising activities, which the EQS Group, as an example, have institutionalised by offering four platforms:

  • the handling of News distribution by dissemination of press releases and Disclosure information related to local rules and regulations for issuers on the stock exchange domestically or abroad

  • the establishment of Websites and under this the specialised IR Website and IR Apps solutions to ensure an easy and informative platform for the company’s financial stakeholders,

  • the effective use of the printed annual report transformed into an interactive IR Online financial report for which the company will optimize the company’s outreach program with features like conference calls, webcasts and non-deal road shows.

  • the internal and external use of stock related information displayed in charts and tools that deal with a broad scale of information to provide the management with updated information on consensus material from the financial analyst community to ensure the company is living up to the outcome of the Investor Perception Survey.

These are examples of how the EQS Group handles challenges for the company, to live up to what I earlier called “a consistent and continuing communication strategy”.

CENSERE: For me, it sounds like the company’s investor relations function shall act as an octopus with a great deal of different responsibilities.


But that is exactly also what the IR function is – an octopus. Below I have divided the IR tasks into four components:

On these components we will divide the responsibilities into what could be called

Packaging: all financial reporting, news releases, and corporate governance issues.

Distribution: all outreach activities for a diversified target group that requires differentiation in material delivered according to audience specific investor type and investment style.

Customers: the target group the company has identified as the preferred shareholder base and financial stakeholders overall.

CENSERE: But this implies that IR is much more than an administrative function supporting the management with daily information of movements in the capital market?


Yes, exactly – that is why the listed company will define Investor Relations as a strategic management responsibility. The management will, with the use of strategic tools, be able to integrate the functions of finance, communication, marketing and securities law compliance, in the management of the company’s corporate and financial communication policy.

This will effectively be handled by the company to enable the most effective two-way communication between the issuer and the financial community and other constituencies. Which ultimately contributes to a company’s securities achieving fair valuation, and in total shall require the company to have a well functioning strategy for how to handle the ultimate task of communicating the key value drivers to the owners of the company – the shareholders.

This process is of equal importance for day to day operations as in situations with M&A activities, where the IR function will often be involved in the process of peer group analyses and valuation.

CENSERE: Then you are close to the end product of actually making a pro-active approach to the target groups?


Yes, correct – the company and its IR function is now ready to build relationships with the target investor and analyst audience. We then need to create content. As mentioned at the beginning we need to create visibility and awareness of the company’s competitive advantage so the key value drivers of a company’s business are current and obvious to investors.

We would in particular look at a number of examples from both financial and non-financial key value drivers like the implementation of M&A strategies, innovation, branding, and management credibility; all seen from a communication perspective. What would investors favor in their investment assessment? How can the issuer assist the investment and analyst community in making valuable decisions on the fair value of the intrinsic value of the company? Coming back to the subject: why should investors invest in the company?

All sounds nice and easy, but the simple fact is that the investment climate is, and has always been, in constant development and it changes rapidly with more sophisticated valuation models. As IRO you need to be familiar with the fundamentals of these models – what are investors looking for in a company? How can we have the sell-side to support the company’s equity story? Each and every one of these funds and audiences will look at the company’s financial communication policy, so as IROs we know that our pro-active investor targeting approach will be tailor-made after the principle of differentiation – difference in audience, difference in investor type, and difference in investment style. For each segment we use our IR Tools to ensure ultimate usage of the communication resources invested.

CENSERE: Would you say that this is the final step in your IR-valuation process?


Not quite – in that we can always improve and in particular we need to make effective use of our investment in our Investor Perception Survey. For this we give our survey an extra look to ensure that we are in line with the market perception. Is there room for improvement? Can we optimize our IR program and how?

We set up a number of goals:

  • Optimise value of the company’s stock
  • Deliver lowest cost of capital
  • Reduce share price volatility

We advise the company to look at a number of IR-value drivers that might be missing in the IR strategy, or at least could make an impact by adding further transparency, better corporate governance and more value to the IR program. We would look at the company’s IR success criteria by focusing on a number of recommended features, like:

  • Capital Markets – where is the money?
  • Shareholders – who owns your stock?
    • Potential new investors – how do I find them?
    • Targeting, investors in peers
  • Road shows
    • Broker or independent?
  • Investor feedback – perception work
    • Unbiased? Independent?
  • Consistent communications
    • See major investors and potential investors annually as a minimum
  • Website and webcasting
    • Retail as well as institutional solutions
  • New Social Media
    • IR Apps solutions
  • All this to set just some basic goals for the company’s IR strategy:
    • A lower cost of capital
    • Takeover protection
    • Higher profile
    • Shareholder wealth

CENSERE: I never thought that the IR-function would be so involved in the strategic communication process. Would it not be difficult to measure the performance of such a diversified process?


Not really – we implement all the benefits to our written Investor Relations Policy – an extended version of the Hong Kong Shareholder Communication Policy – where we would like to communicate internally that IR is not a cost center, but in its strategic platform generates value through mechanisms like:

  • Share price reflects the Company’s true value
  • Less volatility in your share price
  • More stable shareholder base / mix
  • Consistent communication messages
  • Company story known and recognised
  • Regular two way feedback
  • Value for money IR programme

In a simple, but comprehensive spread-sheet, we then make valuable statistics on a large number of IR activities executed by the IR function – all to be communicated internally for the top-management to be guided on the effect of the investments made in the listed stock.

CENSERE: and you will be able to show how the IR activities create value for the company and investors?


Technically, we operate with the term “Return on Investor Relations” (ROIR). We measure success. We measure costs. In a formula:

ROIR = (+ / -) perceptions + success – costs

To verify the effect of our effort to create IR value we use both quantitative and qualitative performance criteria measurements.

CENSERE: This is to take IR to a higher level – right?


Yes, but where is the fun for a manager to run an effective function if you cannot measure the performance?

CENSERE: So true – much thanks for this lesson in strategic IR.


You are most welcome – and should you have further questions would I be pleased to hear from you on Lynge Blak, ph +852 6258 6174 – e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it. – and much more information to be found on