Why Private Companies Need to Meet with Sell-Side Analysts
Private companies often tell us about the considerable time and effort they spend meeting with investment bankers and sharing insights on their business, out of hope that these bankers will take an interest in underwriting their IPO. Yet when we ask which sell-side research analysts they’ve met, we are typically met with a blank stare.
Many executives don’t understand the importance and value of meeting with sell-side analysts while still a private company. In fact, most management teams don’t realize that research analysts actually want to meet management teams of private companies. For sell-side analysts, meeting with private companies enables them to build an early relationship with promising companies and gain valuable insights on the industry and products.
At Westwicke, we advise private companies to develop a sell-side strategy and devote significant time to meeting influential sell-side analysts. These analysts hold big sway with the investment community, and a strong, sustained relationship can boost your company’s reputation on Wall Street and make a difference for these key reasons.
Relationship building – After successfully completing an IPO, you will likely maintain a relationship with the bankers, but the research analyst is the one who will consistently interact with your company by publishing research notes, doing ongoing diligence, and meeting with you at conferences and non-deal road shows. Your management team will likely spend more time with the analyst than they anticipate, so it’s imperative that management and the analyst have a strong working relationship. To make that happen, you want to meet the analyst early and often — and have confidence in your analyst selection as you choose your investment banks.
Gauging interest – Your analyst will be asked for his or her opinion of your company while their bank is considering underwriting your IPO, during your IPO road show, and once you are public. It is essential, then, that the analyst is a true “fan” of your company’s products and prospects. This level of knowledge and support takes some time to cultivate. If they’re not a true advocate or do not have a deep understanding of your company, you might see that come across in conversations with investors.
Competitive intelligence – Sell-side analysts take part in hundreds of meetings with companies in any given year. And through these meetings, they gain access to a significant amount of industry knowledge. When you meet with them, they are often able to provide you with insight that you wouldn’t normally be able to obtain.
Business development opportunities – Much like competitive intelligence, analysts are often privy to the business development desires of larger companies — and are asked for ideas by these companies. Your company may have fallen under the radar (especially if you have chosen to keep a low profile), and a referral by an analyst might jumpstart a wonderful business development opportunity.
Access to the buy side – Some sell-side analysts have better relationships with leading buy-side firms than others, and finding the right analyst is key. Better analysts arrange better road shows, host better conferences, and make recommendations that investors are more likely to heed. Given that many sell-side analysts have strong relationships with leading buy-side firms, a referral from the right one may be the difference between getting a meeting or not.
When you meet with sell-side analysts, remember that first impressions matter, and make sure your messaging, corporate presentations, and responses to likely questions are ready for “prime-time.” Westwicke can help you identify key analysts in each space to increase the effectiveness of your efforts and the likelihood of analysts and investment banks working with your company. We can also make introductions and help you prepare for meetings. Feel free to email me to find out how.
John Woolford is a Managing Director on Westwicke's life sciences team. He has extensive experience in investor relations, as well as IPOs, capital raises, M&A, and other business development activities. He has a BS in microbiology from the University of Maryland at College Park and an MBA from the R.H. Smith School of Business.
Tags: sell-side analysts
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