Aramark Investor Relations Program
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Holmes Report

Aramark Investor Relations Program

Following its IPO, ARAMARK faced an unusually broad array of IR-related challenges.

Paul Holmes

Following its IPO, ARAMARK faced an unusually broad array of IR-related challenges.
 Though it generates $9 billion in annual revenues and has 200,000 employees, ARAMARK is far from a household name. Previously known as ARA Services, it went private via a management-led LBO in 1984. Over nearly two decades as a very successful private company, it developed a strong culture which presented certain obstacles to full and open communications with the financial community following the IPO.
 As a diversified business services company (primarily outsourced food service and uniforms/career apparel), ARAMARK falls between industry categories. This makes it more difficult for the investment community to follow, and limits the number of analysts who will naturally cover the stock on both the buy side and the sell side. The company’s closest peers are foreign entities, which makes it that much harder for analysts to develop appropriate benchmarks for comparison with ARAMARK.
 Furthermore, when ARAMARK went public on December 11, 2001, at $23, the float was 30 million shares, while under the terms of the IPO, there were 190 million shares (mostly held by insiders) scheduled to be unlocked at three different times over an 18-month period, resulting in a continuous market overhang and impairment to liquidity. And shortly before the IPO, ARAMARK completed its largest acquisition ever, raising concerns in the financial community about integration issues as well as management’s future acquisition strategy.
Partly offsetting these challenges, the fundamental strengths of ARAMARK’s business model and the outstanding long-term track record of the senior management team were well-understood by a narrow group of investment professionals: a solid base upon which we could build.
 RFBinder Partners conducted an initial “benchmark” perception study to substantiate and document the challenges outlined above. The presentation of the conclusions to the CEO, CFO and the IR team represented the first in a series of meetings through which RFBinder Partners developed and agreed upon key objectives for the IR program during 2002. Those objectives essentially were two-fold: addressing the challenges identified through research, and ensuring that the necessary IR policies/infrastructure were put in place.
 RFBinder Partners developed (and later updated) a comprehensive investor relations plan, which provided for: sharpening key messages about the growth opportunities in outsourcing as well as senior management’s track record of success/integrity; proactively educating the marketplace through personal initiatives by senior management; continuing to educate management about the market; and ensuring that the thrust of the PR program was in sync with the IR program. In terms of the IR infrastructure, the focus was in areas such as creating and implementing appropriate disclosure policies and procedures; recommending changes to the IR section of the ARAMARK web site (in process); and assisting in preparation of the annual report. By providing our counsel continuously—through regular meetings and on an ad hoc basis— RFBinder Partners fine-tuned the program and addressed new issues as necessary.
 Campaign execution tactics during the year included the following:
· Three perception studies: in addition to the benchmark, another to address the stock lock-up challenge and a third to gauge reaction to the company’s Investor Day;
· Monthly Market Analysis Reports: reviewing stock market performance, valuation and news highlights for ARAMARK’s peer group (presented to management and in summary fashion to the board);
· Coordinated monthly meetings between IR and PR teams discussing critical issues impacting valuation;
· Integration of key messages developed through perception studies and market analysis into all communications – especially the quarterly earnings press release/conference call and financial presentations for analyst meetings/conferences;
· Investor targeting (U.S. and Europe) helped ARAMARK diversify its institutional ownership by developing target lists of potential investors with an affinity for a company like ARAMARK;
· Development/coordination of road shows to introduce ARAMARK senior management to new institutional investors;
· First Annual Investor Day: particularly important in ARAMARK’s case because of the extent to which the company was unknown in the financial community – and as a vehicle to showcase the management team. We provided extensive counsel on logistics and content as well as a “Do’s and Don’ts” memo focusing on disclosure and key messages;
· Disclosure policy: developed a written policy and prepared memos on disclosure issues related to Sarbanes-Oxley and Reg FD. Successfully encouraged management to provide more formal earnings guidance and fuller disclosure about the company overall;
· Ongoing strategic counsel: especially important regarding the stock lock-up expirations during 2002;
· Worked with ARAMARK’s specialist firm to explain the specialist’s role in smoothing out trading volatility;
· In anticipation of the retirement of ARAMARK’s first IR head, RFBinder consulted with management and the executive search firm about his replacement.
As a result, ARAMARK outperformed major market indices and its peer group in 2002 even as the marketplace absorbed large quantities of stock in the wake of periodic lock-up expirations. The IR campaign significantly expanded institutional ownership and continued strong recognition from sell-side analysts (and new coverage from firms outside the IPO management group), with research that mimics our key message points.
 A close working relationship between the IR and PR disciplines at the company meant that media relations and external communications efforts spoke to competitive advantages and other ARAMARK attributes that are value-enhancing. Coordinated messaging helped to generate very favorable media coverage, notably in BusinessWeek (“The Good CEOs”) and Fortune (“Most Admired Companies”) – articles that spoke specifically to ARAMARK’s key message points and investment appeal: outsourcing leadership; management strength, depth and integrity; and strong fiscal controls.
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