Investor Relations For Private Companies In Nigeria

Before seeking venture capital or considering a public listing, emerging companies or start-ups should establish basic corporate governance standards and financial communication procedures. If these companies pursue private equity financing, a formal board presentation will be necessary to secure the funding. This presentation should include:

– A detailed account of the business and financial history

– A clear explanation of the growth strategy and business model

– Justification for the capital requirement with realistic goals and objectives

 

Start-ups can learn effective financial communication and governance principles from Investor Relations specialists and publicly traded companies by examining their practices.

CEOs should also be prepared for potential investors to rigorously challenge their vision and targets, making adequate training and rehearsals essential. Once funding is secured, the board of directors will likely include representatives from the private equity firms involved. These representatives will have similar information requests and expectations as other institutional investors, requiring:

 

– Real-time updates on industry and company issues

– Regularly scheduled meetings

 

While this process might initially seem tedious, it offers several advantages for private companies, including:

– Adopting high standards of communication

– Becoming familiar with valuation mechanisms

– Understanding how to build an effective board of directors

 

In summary, the earlier a company organises and prepares for this specific communication exercise, the better.

Private equity firms provide an alternative to raising capital through the stock market. These firms raise funds from investors (limited partners or ‘LPs’) who require as much attention as portfolio managers in listed companies. The growing private equity market is increasing competition for capital, prompting firms to develop robust Investor Relations programs, either internally or by outsourcing to specialised service providers. The goals of these programs are to:

– Increase market visibility through effective media relations

– Develop the fund’s positioning and strategy

– Create marketing materials

– Market the fund to potential LPs

– Prequalify potential investors and process all documentation for investor transactions into funds

– Build and manage relationships between fundraisings with current and potential LPs

– Track the fund’s performance and benchmark it against competitors

– Hold annual investor meetings

– Produce and distribute investor reporting

 

For debt financing, both state-owned and listed companies access international capital markets. Sometimes, credit conditions make debt cheaper than equity. Given the close relationship between debt and equity, investors expect a consistent message encompassing both. Therefore, equity and fixed-income analysts from the same institution should be included in Investor Relations meetings.

 

The organisation of debt Investor Relations varies across companies; it might be part of Investor Relations or managed by the finance department. Regardless of the structure, maintaining consistency in messages between both teams is crucial.