GLG gets into corporate access
Jun 19, 2009
Expert network’s new C-Series challenges sell-side model
There’s a new player going head to head with the sell side in the business of corporate access. In the last decade, Gerson Lehrman Group (GLG) has grown massive by being extremely good at one thing: lining up meetings between a vast network of paid experts and investors who pay top dollar for the privilege. Now it is handling traditional IR meetings under the name GLG C-Series.
The C-Series, headed by Weslee Daughters, formerly VP of research development at Soleil Securities, gives clients access to corporate executives beyond GLG’s over 200,000 paid ‘council members’, who are a mix of consultants, academics and current and former corporate officers, all constrained by a ‘company inquiry’ policy barring them from talking about their own companies. Now GLG is hosting small group meetings or one-on-ones with senior management talking directly with investors about their own companies.
Foot Locker had one of the first C-Series events last fall. CEO Matt Serra met with investors in a meeting that included Jeff Edelmen, a former UBS retail analyst. In the past few weeks, C-Series events have been held for RSC Holdings, a $700 mn equipment rental company from Arizona, and ALLETE, a Minnesota energy company. Every company gets a tailored program. RSC, for example, started with a morning webcast for six clients, including three outside the US, then had a one-on-one and wrapped up with a luncheon for eight clients.
Network buildout
For years GLG operated mostly under the radar as networker extraordinaire for the fast-growing hedge fund and private equity industries. It sprang to prominence in a front-page article in the Wall Street Journal in November 2006: ‘Seeking an edge, big investors turn to network of informants’. Despite GLG’s firm policies around material disclosures by its council members, some companies, including Applebee’s, had barred employees from signing on as council members.
GLG is a technology company – a backbone of compliance, payment and logistics systems with around 700 employees and 17 offices world-wide handling on average 20,000 ‘interactions’ a month with experts in eight broad industry ‘councils’. Clients, 95 percent of them in financial services, either pay for a bundled subscription or choose à la carte to access the network of experts. The process is now so entrenched that investors ask each other, ‘Did you GLG it?’
GLG saw an opportunity in the changes on the sell side and buy side over the last year. ‘As the sell side has been put under economic pressure, they’ve been cutting back a lot on coverage, making management access programs much narrower and less useful for IROs,’ says Dmitri Mehlhorn, GLG’s head of global operations. ‘It’s also a lot harder for a company to get its message out directly to an investment community bludgeoned by global macroeconomic forces.’
Mehlhorn says GLG’s lack of bias in establishing connections between the investment community and experts including company management helps it fill the gap left by the sell side.
GLG’s clients include hedge funds, venture cap investors and private equity firms as well as mainstream mutual funds and some sell-side analysts. While GLG doesn’t provide IROs the same kind of quantitative intelligence about meeting participants that a sell-side firm would, Mehlhorn says it can give them information about investment style, and IROs can have a say over who gets to attend meetings.
Clients pay for the privilege of participating in C-Series events, just like GLG’s usual business model. What’s different is that the experts – senior management – don’t get paid. Plus, GLG’s usual ‘company inquiry’ policy is suspended so executives can discuss their own companies under normal disclosure rules and policies.
GLG’s corporate access offering is another sign of a strong focus on this area of investor relations, with new market entrants and revived attention from some sell-side firms. IR magazine reports on the trend in its upcoming cover story, ‘On the road again’ (July 2009).
By Neil Stewart