The resignations of both the chairman and deputy chairman of Telecom Eireann this week will not dissuade investors from putting money into the State telephone operator when it floats this summer. The management board, not the chairman or his deputy, is the key element investors question when companies go on roadshows in the US and Europe prior to flotations. That's the consensus of those who have actually gone on such roadshows, where, it is said, fund managers and other investment managers "want to see the colour of your eyes".
Typically, when undertaking flotations, companies embark on roadshows which can last several weeks, visiting fund managers and analysts in Europe and the US. Presentations usually last about 30 minutes, with a further 30 minutes for questions. They can take place on a group or one-to-one basis.
Ryanair chief executive, Mr Michael O'Leary is no stranger to roadshows and presentations, having taken part in several on behalf of the low-cost airline, which is listed in Dublin, London and on the Nasdaq in New York. "I don't think we ever brought David Bonderman [Ryanair's chairman] on roadshow with us," he says. "It is the chief executive and the chief financial officer who are the key figures." In two years of roadshows, Mr O'Leary says, Ryanair has not been asked one question about the make-up of the board or about Mr Bonderman.
Mr Bonderman is a Texan investor who has a long history of rescuing troubled airlines. He has major stakes in US airlines Continental Airlines and America West and is a well-known figure in the US.
Mr O'Leary, whose company raised £100 million when it floated in May, 1997, says Ryanair changed its chairman from Mr Tony Ryan to Mr Bonderman in October 1996 and floated the following May.
What investors look at, he says, is the "chief executive, the chief financial officer and whoever else is in senior management".
Investor roadshows have a reputation for entailing rigorous questioning from institutional fund managers. Mr O'Leary says they want to know details of your plans for growth, your profit projections and whether they will match.
"If both match, they'll buy; if they don't, they won't," he says.
Senior executives at software group Iona Technologies, which floated on the Nasdaq in 1997, are equally familiar with investor roadshows. The company issued 3 million new shares in 1997 valuing it at more than £250 million at the time.
Iona's chief financial officer, Mr David James, says investors want to see the management team in person and ask them questions. "They do ask probing questions. The key personnel are the chief financial officer and the chief executive."
This week Telecom announced that it had appointed Mr Malcolm Fallen as its new chief financial officer. He is a former British Telecom employee. Mr Fallen, who is said to be an impressive operator, takes up his post on April 12th.
Mr James says two months "is a bit tight" but it is better to have a new chief financial officer appointed prior to an initial public offering (IPO), rather than post-IPO. Making appointments to such positions post-flotation does not impress investors, he says.
The management team is expected to be very conversant with its business and its markets, says Mr James. "Investors want to know how you are going to position your company, what are your customers' needs and why will the company be better postflotation."
He says investors also focus on the business model for the future, "what kind of profitability they can expect, and how they can measure the management team going forward".
Both Mr O'Leary and Mr James say there are differences between European and US investors in the approach they take to companies.
According to Mr O'Leary, US investors "take a more strategic view of life". He says they want to know and understand your business plans for the next three years and whether you can maintain your projections. "If you ever let them down, of course, you get killed," he says.
He says Irish, British and European investors "tend to get distracted by little things". In Ryanair's case, he says, an example would be its ongoing rows with Aer Rianta, the State airports operator, over landing charges. "They [investors] are less growth-orientated and a bit more defensive," he says.
Mr James says it is difficult to generalise but European investors tend to take a longerterm view of the business than their US counterparts. "They are less focused on quarterly results than US investors," he says.
