Is There Any Way to Attribute Revenues for Corporate Access?

One of the items valued by the buyside is access to corporate management.  As was stated before, this could be a meeting or presentation at a conference or non-deal roadshow.  After either event, how can the sponsoring investment bank confirm that the buyside client is doing more business i.e. trading commissions?  The bank can check the before and after revenue levels in regards to the trading activity for the issuer.  There are certain caveats that must be taken into account.

• If the security is lightly traded, then the fund manager may execute trades in a more heavily traded stock to pay for the meeting.
• If the meeting merely caused the fund manager to keep the current holding, then the manager may execute trades in another security to pay for the meeting.
• If the trading desk for the sponsoring bank does not give "best execution" for the security, the manager may execute trades in another security to pay for the meeting.
• A better metric may be to calculate the trading market share of a security.

Issuers at Industry Conferences

In prior posts, we have gone over what happens at industry conferences.  The process of allocating meetings to investors such as mutual funds, hedge funds, pension plans, etc. was reviewed.  There is another client at the meeting - the corporate representative.  This can be a high level manager at the company such as the CEO, Chairman, President or CFO or the Vice President of Investor Relations.  The investment bank asks the buy side who they want to meet.  During the scheduling portion of the conference set-up, this list is previewed by the corporate.  At this time, the corporate may edit the list.  This could be as follows:

1. I want to see these 3 investors because they are long term holders of my company
2. I do not want to see this investor because they are traders of my stock
3. I need to see this investor because they hold 5% of my company

The corporate access team at the investment banks are always balancing the needs of the buy side with the needs of the corporates.  They have to handle 2 different sets of customers.

Industry Conferences

Buy side money managers and analysts are always seeking insight on the companies currently in their portfolios or on their watch lists. They are looking for any information that would affirm or change their investment thesis. One of the venues where this occurs is an industry conference sponsored by a sell side investment bank. Here, corporate clients such as Intel or Altria will send their officers to speak to the buy side either in a presentation or meeting.

This is where the size or importance of the firm make an impact. In the beginning, the salesperson will invite all their interested clients to the conference. The buy side representative will indicate which corporates they wish to speak to in a group or 1-on-1 basis. This is contingent on the corporates' availability. Some of them will only speak in a presentation setting. Others will desire to have meetings.

Depending on the conference and the sponsoring firm, conferences may or may not be exclusive. So the firm may allow all buy side requests to be approved for attending the conference. Other times, attendance will be tightly controlled. However, for all conferences, meetings and activities (such as golf outings) with corporates are controlled and scheduled by the corporate access team. The meetings and activities are where having a good research salesperson can help a buy side firm. Obviously, for the giants such as Fidelity, S.A.C. Capital or Capital Group; their requests are given precedence. But for a firm on the border, having an advocate that can persuade management to give them a meeting is invaluable and would result in a better broker vote.

Personalized Information

Access to Intellectual Capital

Buy side firms are hungry for information as more recent and more accurate data give them an advantage when deciding on investments. There are two main sources: the research analyst at a sell side firm and corporate clients i.e. the companies that are covered.

Access to the research analyst through meetings or phone calls is coveted. These interactions with the analyst allow the buy side to understand the thought process behind their recommendations. It is not the actual buy/hold/sell opinion that interests the fund. The meeting would be held with the PM or buy side analyst. During the last two years, there have been staff reductions in the research departments of mutual fund firms. The trend has been towards more reliance on the sell side analyst's ideas since some sectors are no longer covered. Outside of the financial centers (New York and London), research analysts make trips to different regions to discuss their ideas. In the centers, there is a critical mass of firms and the analyst can just take a taxi or train for a meeting. In a regional trip, the analyst may have five meetings in three cities in a day. This is called Analyst Marketing.

Corporate access comes in the form of meetings with important officers of corporate clients such as the CEO or the CFO. There are many formats. Sell side firms sponsor conferences for different sectors and/or regions. Many corporate clients are invited to speak at them and, if they desire, to hold meetings with investors. Another venue is the Non-Deal Roadshow. This is when corporate officials travel to a region(s) to tell their company story to their current and potential investors. They may also set up a Field Trip to a third site. For example, an oil company may have the investors visit a refinery or off-shore drilling rig to experience the business firsthand. These events are allocated by the sell side firm. Here is where the research salespeople spring into action and try to get their clients approved for attending the limited amount of events.

Both types of meetings are very important for client service and, hence, the broker vote.