Building Better Relationships with the Sell-Side

Addressing Misconceptions About the Sell-Side

Many IROs mistakenly view sell-side analysts as adversaries. Megan emphasizes that this doesn't have to be the case. Analysts are simply trying to provide value to their clients. It's important to recognize that they cover multiple companies and have limited time. By understanding the structure of sell-side firms—how analysts are compensated and what drives their work—IROs can build more productive relationships and tailor their approach to meet mutual goals.

Engaging with Junior Analysts

One aspect of sell-side engagement often overlooked is the importance of junior analysts. These individuals frequently handle the modeling and could eventually take over coverage. Megan suggests including them in discussions and offering educational opportunities. Hosting post-earnings follow-up calls a few weeks after the initial release allows for more in-depth discussions once analysts have had time to process the information. Providing access to management or subject matter experts also gives analysts unique insights, encouraging them to keep your company top of mind.

Educating Analysts on Your Business Model

Educating sell-side analysts about your business model is an ongoing effort. Megan highlights the need for patience and persistence. Be prepared to explain aspects of your business multiple times to ensure accurate modeling. Offering public data and hosting modeling sessions or “teach-ins” can be incredibly valuable. This time investment can lead to more consistent estimates and help analysts better understand how macro changes impact your business.

Securing Sell-Side Coverage

For companies struggling to gain analyst coverage, Megan advises focusing on smaller firms instead of obsessing over big-name institutions. Smaller firms can offer more focused and valuable coverage. Industry conferences—even those not specifically investor-focused—can be great places to connect with analysts. Additionally, targeting up-and-coming analysts eager to initiate coverage can be a winning strategy.

Maximizing Existing Analyst Relationships

To get the most from current coverage, Megan recommends providing incremental access and insights that encourage analysts to publish. This could mean organizing calls, lunches, or office visits with management or key personnel. Understanding the questions analysts are getting from their clients can help you tailor these interactions. Bringing internal subject matter experts into the conversation can offer fresh perspectives, giving analysts new material to work with.

Managing Non-Deal Roadshows (NDRs) and Marketing

When it comes to NDRs and marketing, Megan advises proactive planning. The shift to virtual meetings post-pandemic has allowed for more efficient scheduling and broader reach. However, in-person meetings still hold value. IROs should feel empowered to push back on requests that don't align with their goals and suggest their own criteria for meetings.

Setting Expectations for Management

Educating management on the sell-side role is essential for setting the right expectations. Megan recommends providing context on analyst backgrounds and relationships to help management understand these interactions. The key is keeping the relationship professional and not taking analyst opinions too personally. Ensuring management is aware of the importance of keeping analysts well-informed can foster more productive and balanced relationships.

Conclusion

By applying these strategies, IROs can strengthen relationships with the sell-side, resulting in better coverage, more accurate modeling, and enhanced market perception of their company's story. Building these relationships is a long-term effort that requires clear communication and proactive engagement. With persistence, IROs can create valuable, mutually beneficial partnerships with sell-side analysts that elevate their company’s market presence.

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