Out of the Shadow: Building an Independent CIT
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Out of the Shadow: Building an Independent CIT

Market conditions had never been worse. Investors were flocking to safety as the public issuance market hit its lowest point in over 30 years. Amidst all this, Tyco International announced that it would spin-off its enormous finance unit, CIT Group Inc. But CIT faced more than challenging market conditions as it prepared for its IPO. Just as it entered the quiet period, Tyco’s flamboyant CEO, Dennis Koslowski, resigned amidst allegations of tax evasion.

Paul Holmes

Market conditions had never been worse. Investors were flocking to safety as the public issuance market hit its lowest point in over 30 years. Amidst all this, Tyco International announced that it would spin-off its enormous finance unit, CIT Group Inc. But CIT faced more than challenging market conditions as it prepared for its IPO. Just as it entered the quiet period, Tyco’s flamboyant CEO, Dennis Koslowski, resigned amidst allegations of tax evasion.
The various federal and local investigations that ensued broadened to include an enormous accounting scandal that cast a cloud of suspicion over Tyco and CIT. Against this backdrop, CIT also had to completely rebuild its communications and investor relations infrastructure. The company, established in 1908, had been public twice before, but had ceded all such responsibility to its parent Tyco. CIT/Edelman worked as a cohesive unit under incredible time pressure to combat market scrutiny, media skepticism and employee confusion to establish the CIT story. The deal ranks as the largest IPO of 2002, the fourth largest IPO in history, and the largest financial services offering ever.
CIT/Edelman faced a unique set of circumstances around its IPO. They included: an unrelenting market that questioned demand for all offerings, especially one of this size; reputational issues as a result of CIT’s association with Tyco; the need to create an entire communications/investor relations infrastructure. As a result of these factors, many on Wall Street and in the press questioned the potential viability of the IPO.
CIT/Edelman began with a series of due diligence meetings with senior management and found that establishing trust and credibility was key to building investor confidence. The team then initiated a series of soft soundings with the investment and analyst community and learned that CIT’s management team, in tact from its pre-Tyco days, enjoyed residual goodwill on the Street, but questions loomed regarding their association with Tyco.
An extensive media analysis was conducted concluding that CIT was a victim of “guilt by association;” its reputation was tainted by Tyco’s deteriorating image. Case studies conducted on similar deals found that this “reputation overlap” often cursed nascent companies after an IPO. Because Tyco was not retaining any interest in CIT, there was a unique opportunity to make a clean break. Post IPO, research was conducted on best practices re: announcing charges.
The overarching objective was to have a successful IPO. CIT/Edelman research led them to a single conclusion on how to do so: CIT must break the reputation overlap, quickly and emphatically, by telling its story in a compelling way. CIT must demonstrate CIT’s inherent value as a standalone company; reestablish its brand by showcasing management’s credibility and experience, key to which was positioning its CEO, Al Gamper, as the anti-Koslowski; create a communications infrastructure developing the necessary tools to operate as a public company placing the highest priority on transparency and good corporate governance.
Building CIT’s independent identity required an integrated communications program to ensure a consistent image with all audiences: investors, media, employees and customers.
 By the time CIT/Edelman partnership began, CIT was well into its SEC mandated quiet period. As a result, it was suggested that CIT use this time to prepare for future phases and go over communications recommendations. To position CIT successfully, Edelman began with a messaging workshop that served as the foundation for investor, media and employee relations initiatives.
After editing the road show presentation and developing core messages and talking points, in accordance with SEC guidelines, the team prepared a suite of materials for all audiences such as investor memos, customer and vendor letters, Mr. Gamper’s statement, briefing materials for the spokesperson, and an investor relations kit. The team then drafted a Q&A for the media, and developed press kit materials. The work also included preparing the letters, emails and voicemail scripts for employees – an audience of key importance to Mr. Gamper and the future success of the company.
Due to Tyco’s negative media coverage, CIT/Edelman debated whether to recommend interviews on listing day. The team realized, however, that it would be a unique opportunity to establish the CIT brand by giving the company a face – Mr. Gamper – and positioning the company as focused on returning to life as a public company. It was arranged for Mr. Gamper and other CIT executives to ring the opening bell.
Following the Exchange-sponsored ceremony, Mr. Gamper conducted a “walk-by” interview with CNBC and a floor interview with CNNfn on his way to the specialist station where he bought the first 100 shares of CIT stock. CIT/Edelman also arranged for Mr. Gamper to participate in the NYSE daily b-roll.
The rest of the day focused on communicating the details of the IPO to employees. Events included an all hands meeting, Q&A session with Mr. Gamper and a reception that allowed management and employees to mingle informally. CIT/Edelman also supported the employee direct stock purchase plan, including the development of a gift box for employees that contained a stock purchase program book, letter and a shirt. In addition to fostering goodwill, the program confirmed management’s commitment to aligning employees’ incentives with those of the company – an effort the Street applauded.
 To highlight CIT’s viability as a stand-alone company CIT/Edelman had to demonstrate the company’s ability to function as a public company. The test came early, as CIT’s second quarter results were due just two weeks after going public. For direction, a quarterly earnings best practices report and a detailed peer analysis was developed. From it, CIT/Edelman provided guidelines on how to issue their results, focusing on increasing transparency and then drafted the necessary documents: conference call script, earnings release, Q&A document. Establishing and publicizing corporate benchmarks to help demonstrate continued viability was also suggested – key of which were the reinstatement of credit ratings and the initiation of a commercial paper program both of which had deteriorated under Tyco.
Edelman also used its research charges to craft messages for CIT’s earnings release for the quarter ending 9/30/02. Edelman also advised CIT on how to respond to intense investor questions regarding CIT’s credit exposure to troubled areas such as Argentina, and the airline and telecom industries. To monitor progress, a regular stock performance and analyst coverage monitoring system was instituted.
Edelman suggested that CIT take a proactive stand on corporate governance issues by being a “poster child” of good practice. Edelman then provided recommendations and issued a release on the post-IPO board of directors that highlighted corporate governance issues. Through Corporate Governance Advisors’ practice, Edelman also arranged a meeting with former SEC chair, Richard Breeden.
On the media relations front, CIT had limited experience working with reporters, and any previous coverage came from reporters on the Tyco beat. The relationships that needed to be developed on the corporate level were identified and Edelman suggested a series of editorial board briefings. To drive business and highlight success, it was suggested that CIT’s business line heads engage more actively with the trade media with the highlight being a 10-region, turn-key program for CIT’s forecasting unit. The work on employee communications continued as a newsletter content to highlight the stability of management and corporate ethics was developed. Edelman also assisted CIT in publicizing their ad campaign.
In the beginning, Edelman functioned as an internal communications/IR department for CIT; they then helped CIT structure their communications teams. Edelman researched the structure of corporate communications and investor relations departments at other major international companies to provide CIT an idea of best practices. From this a manual and companion toolkit on corporate communications’ policy and protocol was drafted.
CIT/Edelman worked as a cohesive unit under incredible time pressure to combat market scrutiny, media skepticism and employee confusion to establish the CIT story. Quotes from an extensive, confidential, media/investor perception audit CIT/Edelman recently completed speak to the success of our program.
CIT’s IPO was a success. It ranks as the largest IPO of 2002, the fourth largest IPO in history, and the largest financial services offering ever. The deal was able to price within the anticipated range; enjoyed good demand (exercised over allotment option); enjoyed significant employee participation in the stock purchase plan; and garnered widespread coverage that highlighted CIT’s business, not just the link to Tyco. CIT is presently the largest independent financing company.
CIT/Edelman successfully positioned Mr. Gamper as a no-nonsense leader, best exemplified in a profile piece in Business Week and in our listing day coverage (CNBC, CNNfn, The New York Times). CIT/Edelman held a series of editorial board meetings with The Wall Street Journal, Newark Star Ledger, Business Week.  Its ad campaign was also featured in The Wall Street Journal. Its positioning as leaders on corporate governance included coverage on its initiative and board of directors as well as avoiding inclusion in a damaging Wall Street Journal piece on board member compensation. Investor quotes demonstrate its success: “I found management to be very frank, open and accessible.”
A strategic plan was generated that established basic communications systems and structured and educated the investor relations team. CIT now has a strong team in place. In fact, investors stated about the department: “So far, so good. Very responsive and the disclosure has been good.”
Overall, the three-pronged strategy helped get CIT out of the shadow of Tyco as evidenced by one investor’s comment: “Yes, some may wonder if there is something wrong at CIT given its past affiliation with Tyco. But their recent announcements show that they are taking the right steps.”
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