An Alternative Access to Management Model


New York – One of the areas that we have repeatedly heard has value for the buy-side is in the access to management model. Typically face-to-face meetings are set up between company management and buy-side investors so that the investor can ask the right questions and the corporation may gain more access to capital.  

Historically, many road shows were explicitly centered on an investment banking deal, such as an IPO or a secondary offering. The road show personnel would include the company management, the bankers and the research analysts and they would travel to key institutional accounts basically pre-selling their securities. Regulatory intervention at the time of the Global Research Settlement addressed the obvious conflict that the analysts had with regard to touting securities that they were supposed to be rating. Since that time, the access to management model and the non-deal road show seem to have become more popular.  While the road show is the most prevalent access point, the model can also revolve around conferences.

Problems with the Traditional Model

There are a number of issues created by the relationship between the sell-side analyst and the company. First, a covered company may try to pressure the analyst into raising its ratings. Second, the analyst may pressure company management into participation through duress about the ratings. The third revolves around the information that the analyst is likely to gather over the course of a road show from management. Given that information exchange is the lifeblood of an analyst’s job, it becomes difficult for the sell-side analyst to remain silent about the information that has been gathered-though to be fair, the investment banks tend to have strong policies designed to prevent this.  Fourth, too many meetings may be set up for a road show, where the analyst is using a “shot-gun” approach in an effort to “see what sticks” while a more focused “laser” approach which includes all relevant decision makers could be more effective from a time and effort perspective.

Alternative Research Invades the Space

One firm that is taking aim at these conflicts and inconsistencies is Hanley & Associates. Hanley, an alternative research provider, sets up management and investor meetings, while avoiding the investment banking relationship which introduces much of the conflicts. The value proposition of Hanley, and firms like Hanley, is in generating quality meetings among decision makers which remain confidential to the parties involved.  Another interesting aspect of the Hanley model is the fact that the institution pays for the service. While the economics would certainly work if the research provider was getting paid by the corporation, this relationship would introduce much of the conflicts listed above. If it is the investor that pays for the service, the conflicts can be largely avoided.

The question is how to get the institutions to pay for a service from an alternative research provider that they are already getting as part of an overall service by a sell-side shop.  Despite the challenges to alternative research providers in this space, the cleanness of the model alongside a perceived ability to deliver confidential, highly targeted meetings with decision makers could lead to a growing market segment for firms like Hanley & Associates.


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