THE ESTABLISHMENT OF FINANCIAL COMMUNICATION IN THE ERA OF MASS PRIVATIZATION
Perhaps the most significant economic transformation of the political transition was the privatization of state-owned enterprises. Within a few years, the key sectors of the economy moved into private ownership, foreign capital appeared, and Hungary became integrated into the circulation of international markets.
Although the stock exchange did not play a major role in the initial phase of privatization, by the mid-1990s it had become a central actor in mass privatization. Public offerings of shares in large state-owned companies followed one another, and trading volume on the Budapest Stock Exchange (BÉT) increased tenfold between 1996 and 1997, reaching nearly HUF 100 billion.
The market was still in its infancy; everyone was learning. Lead managers bringing international expertise were unfamiliar with the Hungarian market environment, while clients, state institutions, and we ourselves were becoming acquainted with new concepts, rules, and operating frameworks. Privatization therefore also meant the introduction of an entirely new economic culture and a fundamentally different form of communication.
ENTERING THE CAPITAL MARKETS
To support IPO communications, the State Privatization and Asset Management Company (ÁPV Rt.) issued a tender financed by PHARE funds. Pressinform and Capital Communications were ultimately selected as winners, and from that point onward, the two firms were invited to bid jointly on all IPO assignments. Capital Communications was backed by Dewe Rogerson, a British firm that was among the leading international financial communications advisors for capital market transactions in the 1990s.
Our advantage lay in prior experience in financial communications: in 1992, commissioned by the Ministry of Finance led by Mihály Kupa, we handled communications related to a government bond issuance, and three years later, to the placement of corporate bonds by Reemtsma Debreceni Dohánygyár Kft. (with CSFB acting as lead manager in the latter case).
TVK, 1996 – THE FIRST REAL TEST
Our first truly major assignment was the public offering of shares in TVK. It was then that we realized IPO communication is not about the number or creativity of media appearances, but about a thorough understanding and disciplined application of an exceptionally strict regulatory framework. It is an environment where even a minor error can have serious consequences. In one transaction, for example, due to a failure by the advertising agency responsible for media buying, we had to secure placement of a mandatory notice in the editorial sections of three designated daily newspapers five minutes before print deadlines. Had we failed, the entire transaction would have had to be halted, causing severe legal, financial, and reputational damage to all parties involved.
Following this first assignment, we were awarded communications mandates for several major privatization transactions, including the IPOs of Richter Gedeon (1997), OTP Bank and Rába (1997), and later Matáv (1999) and Antenna Hungária (2000).
IPO communication is not a conventional campaign; it is a process choreographed with extraordinary precision. Communication began with an announcement by ÁPV Rt., representing the owner, outlining the expected timing and conditions of the privatization. This was followed by presenting the company to potential investors, including its business activities, markets, management, and performance. In the third phase, the details of the IPO were disclosed: the ownership stake offered for sale, the categories of investors involved (international and domestic institutional investors, retail investors, employees, and management), the size of allocations, subscription locations, timing, and other conditions. After announcing pricing, communication entered the subscription period, and the process concluded with the publication of the transaction results.
While foreign and domestic institutional investors were approached directly by ÁPV Rt. and the lead managers through roadshows, informing the international financial press – Bloomberg, Reuters, and major financial publications – was our responsibility. Domestically, communication had to simultaneously address institutional investors, retail investors, and employees considering participation, each in their own language but with legally identical content. At the same time, we had to manage dissatisfaction among retail investors, who often considered their allocated share too small, knowing from previous IPOs that share prices typically rose significantly above the issue price shortly after listing.
Public communication channels – including the prospectus, press coverage, advertisements, and investor communications – operated within strictly regulated frameworks. Every step was supervised by legal advisors and lead managers. There was no room for error; numerous international examples demonstrated that poorly timed or improperly handled communication could lead to costly litigation.
During these IPOs, we worked with leading professionals among lead managers and legal advisors, including CA IB, CSFB, HSBC, and Rabobank, as well as the law firms White & Case and Clifford Chance. Key figures on the lead manager side included András Simor, Csaba Lantos, and Gordon Bajnai, while Ferenc Szarvas and Attila Papi represented ÁPV Rt.
THE IPO IS ONLY THE BEGINNING
A stock exchange listing is not the end point but the beginning. Convincing an investor to buy is one thing; continuously persuading them not to sell is quite another. Many Hungarian companies lacked the expertise, networks, or infrastructure required for investor relations, so we continued working with several newly listed firms for years after their IPOs (e.g., TVK, Rába).
Investor communication is regulated just as strictly as IPO communication. Legal advisors closely monitor whether communication ensures equal access to information for all investor groups and whether it avoids elements that could lead analysts to draw unintended conclusions or influence share prices.
From this period, one fundamental insight has remained with us: reputation is not a one-time event but the result of sustained, long-term effort.
MALÉV – WHEN COMMUNICATION IS NOT ENOUGH
Not every assignment ends in success. Malév was not preparing for an IPO but was seeking a strategic partner during the tenure of CEO Dr. Erzsébet Antal. For potential European airline buyers, in addition to financial indicators, key considerations included the position of the Budapest hub, the network of Central and Eastern European destinations, and slot advantages stemming from its status as the national airline.
Our role was to make these values visible through communication to potential investors, as well as to the international and domestic professional community and the broader public. As Hungary’s national airline, Malév’s perception among passengers – and thus public opinion – directly influenced the seller’s negotiating position.
In this case, we encountered a reality we have seen many times since: even the best reputation-building efforts cannot override fundamental strategic weaknesses of the underlying business. Potential buyers did not withdraw because of negative press, but because CEE route rights, once uniquely valuable, had by then largely been absorbed by major airline alliances. The privatization failed – not due to communication. This is where the responsibility of PR ends.
LESSONS LEARNED
By the late 1990s, financial communication had become one of Pressinform’s defining areas – not by design, but because the market demanded it. And we learned.
We also learned something else. After a reception following the successful IPO of one of Hungary’s largest blue-chip companies, we asked the lead manager how satisfied the company’s highly respected chief executive had been with our work. The lead manager replied, “Why? Did he reprimand you?” That was when we understood that in this environment, flawless performance is the baseline expectation – and the highest praise is silence.